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On September 18th, CICC Research Report stated that, looking ahead, due to weak employment data, we expect the Federal Reserve to cut interest rates by another 25 basis points in October. However, rising inflation will raise the bar for rate cuts, limiting the scope for monetary easing. The current crux of the US economy is not insufficient demand, but rising costs. Excessive monetary easing will not only fail to address the employment problem but could also exacerbate inflation, plunging the economy into a quasi-stagflationary situation.Gold prices rose in early Asian trading on September 18th, as the Federal Reserve may cut interest rates further, which will enhance the appeal of the non-interest-bearing precious metal. ANZ analysts said in a research note that investors cheered the start of a rate-cutting cycle. However, the analysts added that Fed Chairman Powells remarks were not as dovish as the market expected, which curbed the rise in gold prices.Japans core machinery orders month-on-month rate in July was -4.6%, in line with expectations of -1.70% and the previous value of 3.00%.Japans core machinery orders in July were 4.9% year-on-year, in line with expectations of 5.4% and the previous value of 7.60%.On September 18, Federal Reserve Chairman Powell, in response to questions about the central banks statutory requirement to achieve "moderate long-term interest rates" at a press conference following the interest rate decision on Wednesday, explained why the three missions given to the Federal Reserve by Congress can be reduced to two major tasks in practice. Central bank officials have long positioned their mission as a dual task, with monetary policy focusing on keeping inflation low and stable and ensuring a continued strong job market, with little emphasis on the third task. Powell told reporters that the third task is real, but in the eyes of central bankers, it is a derivative of the two more well-known goals stipulated by law. He said: "We believe that moderate long-term interest rates are the result of achieving low and stable inflation and maximum employment." For some time, Federal Reserve officials did not believe that the third task required "independent action."

A decrease in the AUD/USD rate toward 0.7100 is caused by weak Chinese data

Alina Haynes

Aug 15, 2022 14:53

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AUD/USD decreases near 0.7100, down 0.08% intraday to 0.7120 at press time, as Monday's Asian session's data dump from China proves to be poorer than expected and adds to the cautious market mood. Investors may be uneasy as a result of the minutes from the most recent monetary policy meeting of the Federal Reserve and the Reserve Bank of Australia (RBA) (Fed).

 

Retail sales in China plummeted to 2.7% from 5.0% expected and 3.1% previously, while industrial production (IP) fell to 3.8% from 3.9% previously and 4.0% expected by the market.

 

In an effort to deter bears, the People's Bank of China (PBOC) earlier in the day lowered the one-year medium-term lending facility (MLF) rates by 10 basis points (bps). The market's confidence was further increased by Japan's GDP growth numbers that were better than anticipated. However, the mood towards Sino-American relations is put into question by the growing number of US MPs visiting Taiwan concurrently with US House Speaker Nancy Pelosi's tour to Taiwan.

 

The market's concerns about inflation were eased by weaker readings of the Consumer Price Index (CPI) and the Producer Price Index (PPI) outside of the US. However, in order to manage inflation, Thomas Barkin, president of the Richmond Federal Reserve (Fed) Bank, declared on Friday that he plans to raise interest rates even more. "I'd love to see a period of persistent inflation control, and until that occurs, I believe we will have to boost rates into restrictive zone," Barkin reportedly said to CNBC, according to Reuters. The Fed hawks who continued to support higher interest rates included Presidents Mary Day of the Federal Reserve Bank of San Francisco, Neel Kashkari of the Federal Reserve Bank of Minneapolis, and Charles Evans of the Federal Reserve Bank of Chicago.

 

AUD/USD traders should concentrate on the August NY Empire State Manufacturing Index, which is predicted to be 8.5 versus the previous reading of 1.1, after observing the early market response to China's monthly data dump. The downside is elusive ahead of Tuesday's RBA Minutes, Wednesday's Australia Wage Price Index for the second quarter, and Thursday's Australian jobs report, despite the fact that lower US PMI data could put pressure on the AUD/USD bulls. Aside from the RBA Minutes, news about China and US ties will excite traders of the Aussie pair.

 

A sluggish RSI at the top suggests that AUD/USD bulls are losing steam as the 200-day simple moving average limits immediate AUD/USD gains around 0.7120. As of the time of publication, the price must continue above the last resistance level from late April, or 0.6990, for the bearish movements to materialize.

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