Daniel Rogers
Dec 02, 2022 15:42
The AUD/USD pair oscillates near 0.6800 in the early Asian session on Friday, a day after reclaiming the 11-week high. Despite this, the AUD/USD pair has climbed for three consecutive days as a result of widespread US Dollar weakness and market optimism on China's Covid situation. Weak US statistics could contribute to the rally's vigor.
At the time of publication, the US Dollar Index (DXY) was under pressure near 104.70, its lowest level in four months, as the dovish stance of Federal Reserve (Fed) members and the pessimistic comments of US Treasury Secretary Janet Yellen increased expectations of easy rate hikes.
Michelle Bowman, governor of the Federal Reserve (Fed), recently stated that we should control the rate of price increases. Prior to him, Fed Governor Jerome Powell and US Treasury Secretary Yellen both alluded to a halt in rate hikes and advocated for a soft landing. Michael Barr, vice chairman of supervision, adding, "At the next meeting, we may reduce the rate of rate increases." Notably, recent remarks by John Williams of the New York Fed appeared to test US Dollar bears as policymakers underlined that the Federal Reserve still has a ways to go with rate hikes.
The predominance of bad US statistics, in addition to Fed-speak, weighed heavily on the US Dollar. However, the US Core Personal Consumption Expenses (PCE) Price Index, the Federal Reserve's preferred inflation gauge, matched market forecasts of 5.0% on a year-over-year basis, but dropped to 0.2% on a month-over-month basis, compared to 0.3% that was anticipated. In addition, the US ISM Manufacturing PMI for November dropped to 49.0 from the expected 49.7 and the previous 50.2.
In addition, the three consecutive days of a decline in the number of daily Covid infections in China from the record high allowed regulators to hint at the "next step" in combating the virus while announcing a number of easings of activity-control measures. Given the close ties between Australia and China, AUD/USD buyers typically celebrate positive developments in Beijing.
Domestic Private Capital Expenditures in Australia for the third quarter (Q3) declined to -0.6%, compared to the predicted 1.5% and the prior -0.3%. Moreover, poor November readings for Australia's AiG Performance of Mfg Index and S&P Global Manufacturing PMI appeared to have weighed on AUD/USD bulls at the multi-day high.
Prior to the speech of Reserve Bank of Australia (RBA) Governor Philip Lowe, it appears that the mixed performance of Wall Street and the multi-month low US Treasury yields weighed on AUD/USD bulls. During his address earlier in the week, the policymaker alluded to a reduction in interest rates; hence, the bull's concerns are justified. In addition, the cautious outlook ahead of the crucial US employment report for November, for which preliminary indications have been negative and which may favor Australian buyers if actual results match forecasts, could weigh on prices.