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Both WTI and Brent crude oil prices rose by $0.60 in the short term, reaching $69.20 and $72.65 per barrel, respectively.On June 26th, Federal Reserve official Neel Kashkari stated that widespread signs of inflation led him to anticipate one interest rate hike this year in the Feds economic projections released earlier this month. Interest rates are expected to remain unchanged until 2027. In a media interview on Friday, Kashkari said, "Im concerned about inflation, and its not just about the situation in the Middle East, but rather a manifestation of broader inflationary pressures in the economy." The war in Iran has pushed up oil prices, and prices across many categories have also risen. This has exacerbated concerns among some Fed officials that inflation is becoming more widespread and persistent, potentially requiring stronger central bank action. A report released earlier this week showed that the PCE annual rate in May reached 4.1%, the largest increase since April 2023. Prices have exceeded the Feds 2% target for over five years. In the Feds dot plot projections released last week, half of the officials who provided dot plot projections expected at least one interest rate hike this year.Federal Reserves Kashkari: The goal is to reduce inflation without harming employment.The German DAX 30 index closed down 328.90 points, or 1.32%, at 24,671.64 on Friday, June 26; the UK FTSE 100 index closed down 19.23 points, or 0.18%, at 10,510.66; and the French CAC 40 index closed down 46.74 points, or 0.55%, at 8,384.87. The Stoxx 50 index closed down 45.53 points, or 0.73%, at 6222.00 on Friday, June 26; the Spanish IBEX 35 index closed down 75.13 points, or 0.39%, at 19438.47 on Friday, June 26; and the Italian FTSE MIB index closed down 480.41 points, or 0.93%, at 51302.50 on Friday, June 26.The International Tanker Owners Association (INTERTANKO) stated that the Hormuz route through Iran is "concerning".

AUD/USD falls to 0.68 on dismal Aussie/China statistics and risk aversion

Alina Haynes

Sep 01, 2022 15:16

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As bears cheer on weak Australian statistics and a risk-off mindset on Thursday, the AUD/USD drops to a new 1.5-month low near 0.6800. Yet, adverse concerns about China, its major customer, may also be to blame for the current weakness of the Aussie pair.

 

Caixin Manufacturing PMI in China fell to 49.5 from 50.2 predicted and 50.4 earlier, signaling the steepest decline in activity in three months.

 

In other news, Home Loans in Australia dropped by -7.0% in July, worse than the -3.0% drop forecast and the 3.3% drop seen in June. For the same time period, Investment Lending for Homes fell by -11.2%, compared to a drop of 6.3% in the previous month. It should be noted that contrary to projections of a 1.5% expansion, private capital expenditure in Australia shrank by 0.3% in the second quarter (Q2).

 

The risk premium on 10-year US Treasuries has risen to a two-month high of about 3.21 percent, and the risk premium on 2-year bond coupons has risen to its highest level since at least 2007. The S&P 500 Futures were trading at 3,930, down 0.36 percent intraday, their lowest level since late July as of publishing.

 

Recent market sentiment has been pushed down by worries about another ship blocking the Suez Canal, skepticism about China's covid circumstances, poor data, and conflicts with the United States over Taiwan. The president of Taiwan, Tsai Ing-Wen, has recently expressed an interest in bolstering ties with the United States in the semiconductor industry.

 

In light of the Fed's recent aggressive posture, despite conflicting data, AUD/USD bears are likely to hold control as China-related news is also unfavorable. Before Friday's release of the US Nonfarm Payrolls report, traders may find some diversion in today's release of the US ISM Manufacturing PMI for August, which is expected to be 52.8 from 52.0 before (NFP).

 

If the AUD/USD drops below May's low at 0.6830, the next major support is seen in early July near 0.6760. Alternately, a support-turned-resistance line from early August, near 0.6850, will join the 0.6830 barrier to probe the pair's corrective slide.

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