11th August 2021 - US CPI becomes the day’s key data to follow, risk catalysts are important too

Market Headlines

US bond yields extended a multi-day rise, helped by the residual effects of recent Fedspeak signalling QE tapering. The S&P500 is up 0.1% to a fresh record high, while commodity currencies outperformed safe-havens. US 2yr treasury yields rose from 0.22% to 0.24% - a one-month high, while the 10yr yield rose from 1.32% to 1.35% - also a one-month high.

Commodities, Brent crude oil futures rose 2.5% to $71, copper rose 1.4%, and gold fell 0.1%. Iron ore fell 1.0% to $162 – a four-month low.

Overnight Currency Range

AUD/USD 0.7316 0.7355

EUR/USD 1.1710 1.1742

GBP/USD 1.3826 1.3872

USD/JPY 110.28 110.60

NZD/USD 0.6968 0.7010

USD/CAD 1.2521 1.2589

USD/CNH 6.4797 6.4890

AUD/JPY 80.67 81.31

AUD/NZD 1.0484 1.0512

AUD Thoughts

AUD/USD remains side-lined around 0.7350 after snapping a two-day downtrend amid early Wednesday morning in Asia. The Aussie pair bounced the off yearly low the previous day as the US Senate passed President Joe Biden’s $1.2 trillion infrastructure spending plan. However, virus concerns and firmer Treasury yields weigh on the quote, not to forget cautious mood ahead of the US Consumer Price Index (CPI) for July.

The stimulus news favoured equities but technology stocks had to post a dull closing for Tuesday amid firmer Treasury yields. The US 10-year Treasury yields rose for the five consecutive days at the latest, up 3.7 basis points (bps) to 1.354%, as optimism concerning the US economy, backed by the stimulus and upbeat jobs report, joined Fed’s tapering concerns. Also contributing to the US bond coupon could be the market’s rush to risk-safety amid the latest Delta covid variant spread and weakness in gold prices.

Moving on, Australia’s Westpac Consumer Confidence for August, prior 1.5%, may entertain intraday AUD/USD traders ahead of the US CPI for July, expected to ease from 0.9% MoM to 0.5%. While soft inflation data may cool down the reflation fears and can help the Aussie pair, early indicators to signal a firmer outcome, which backed by upcoming stimulus, will inflate the hopes of the Fed’s policy adjustments and favour the US dollar to challenge the bulls.

AUD/USD remains vulnerable to refresh yearly low below 0.7288 unless crossing the 0.7410-15 horizontal area comprising multiple levels marked since early July. Even so, a monthly flat-line around 0.7320-15 can offer an intermediate halt during the anticipated fall

Event Risk Data Today

Australia: The August update of the Westpac–MI Consumer Sentiment Index will likely reflect the COVID situation weighing more heavily on sentiment.

US: The ‘reopening’ categories are expected to underpin another sizeable monthly lift in the July CPI (market f/c: 0.5%). The deficit is set to remain wide in July’s monthly budget statement on stimulus outflows (market f/c: -$266.5b). Finally, the FOMC’s Bostic and George, and NY Fed’s Logan will speak.

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