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On May 14th, US international trade commodity prices rose sharply in April, with import prices (market expectation +1.0%) rising 1.9% month-over-month and export prices (market expectation +1.1%) surging 3.3%. This much-anticipated increase indicates that the ongoing conflict with Iran continues to exert pressure on input costs, a point already reflected in the Feds Beige Book in early April as a compression of corporate profit margins. Core import prices (excluding fuel) had already begun to rise significantly before the Iran conflict, and this months 0.8% increase was the same as in February, but this may already include the secondary impact of rising energy prices. Food and feed prices were also significantly affected by rising oil prices, rising 1.1% in March and then another 0.9% in April. Industrial supplies and raw materials (excluding fuel) rose 1.6%; fuel prices surged 16.3%. Capital goods prices were also worrying, rising 1.1%. Consumer goods rose 0.4%, a relatively moderate increase, but still high; automobile prices fell slightly by 0.1%.On May 14th, executives from over ten well-known American companies accompanied President Trump on his visit to China, including Apple CEO Tim Cook, Nvidia founder and CEO Jensen Huang, Tesla CEO Elon Musk, and Qualcomm President and CEO Cristiano Amon. In an interview, Amon stated that the Chinese economy is dynamic.The SC crude oil futures contract fell 2.00% during the day, currently trading at 617.40 yuan per barrel.The European-Mediterranean Seismological Centre reports a 5.5-magnitude earthquake in the Colombian region.May 14th - Traffic in the Strait of Hormuz has increased this week, but analysts warn that more vessels are turning off their Automatic Identification System (AIS) tracking signals during transit. According to Lloyds List, a shipping publication, tanker owners are preparing for prolonged shipping disruptions as regional risks remain high. Current traffic volume is still far below pre-conflict levels. At that time, approximately 130 vessels carrying about 20% of the worlds oil and gas supply passed through the strait daily.

AUD/USD tests bearishness near 0.6350 as China's GDP and US PMIs show improvement

Alina Haynes

Oct 24, 2022 16:44

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After China released positive Gross Domestic Product (GDP) figures for the third quarter (Q3) early on Monday, AUD/USD bids perk up to pare intraday losses to 0.6365. However, negative sentiment, volatile markets, and pessimism surrounding Australia appear to provide challenges for Aussie pair buyers.

 

China's GDP for the third quarter grew by 3.9% compared to the market's prediction of 3.4%, while September's Industrial Output grew by 6.3% opposed to the market's forecast of 4.5%. In September, however, China's retail sales fell to 2.5% from 3.3% as predicted by the market.

 

In addition to hawkish Fed bets and geopolitical concerns about China, it should be noted that recent AUD/USD pricing has been affected by expectations that the Australian government may decrease growth projections in the forthcoming budget update.

 

According to new forecasts to be published by Treasurer Jim Chalmers in Tuesday's budget, Reuters stated that Australia's economic growth will decline significantly in the coming fiscal year as rising inflation reduces family expenditures. ABC News reported elsewhere that Ukrainian General Oleksandr Syrskiy expressed nuclear war concerns. Concerns that Chinese President Xi Jinping will escalate geopolitical tensions with the United States over Taiwan have also weighed on the AUD/USD exchange rate.

 

Despite this, S&P 500 Futures post intraday gains of 0.50 percent, while 10-year US Treasury rates remain at 4.19 percent, extending Friday's falls from the 14-year high.

 

The S&P Global Manufacturing PMI for Australia declined to 52.8 from 53.5 in September and 52.5 as projected by the market, while the Services PMI decreased to 49 from 50.6, and 50.5 correspondingly. This resulted in the S&P Global Composite PMI sliding into contraction territory with a value of 49.6 compared to 50.9 previously.

 

Christopher Kent, Assistant Governor (Economic) of the Reserve Bank of Australia (RBA), emphasizes that the RBA board anticipates further interest rate increases in the near future. The policymaker also highlighted, according to Reuters, that the magnitude and timing of rate hikes will depend on incoming data.

 

Future AUD/USD traders will pay close attention to risk catalysts as well as the preliminary US PMI figures for October. In spite of this, AUD/USD bears are likely to retain control given the recent surge in hawkish Fed bets and geopolitical fears.

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