Broad USD weakness lifts Australian Dollar as US inflation takes centre stage

The Australian Dollar advances 0.75% on Monday. Widespread US Dollar weakness supports the move.
October brings a sharper-than-forecast slowdown in China's consumer inflation, but producer prices exceed expectations.
Ahead of key inflation releases, robust US jobs figures bolster expectations for a December rate increase.

AUD/USD climbs 0.75% on Monday. The sharp rebound puts the pair near 0.6915 at the time of writing. Broad US Dollar (USD) weakness lifts the Australian Dollar (AUD), outweighing mixed Chinese economic figures and heightened expectations for additional monetary tightening in the United States (US).

TMGM Analysis: Financial Market News, Economic Calendar & Market Insights

October consumer inflation in China, Australia's largest trading partner, came in at 0.7% YoY. The Consumer Price Index (CPI) reading was below both September's 0.9% and the market forecast of 0.8%. Monthly consumer prices were flat, matching expectations after the previous month's 0.2% rise. By contrast, China's Producer Price Index (PPI) accelerated to 5.7% YoY in October, above September's 5% and the projected 5.3%. Despite softer consumer inflation, the larger-than-forecast rise points to continued price pressures at the production level.

Close trade links make China's economic outlook especially significant for the Australian Dollar, and the latest readings offer a mixed assessment. On Monday, however, the weaker US Dollar appears to be the main driver of sentiment, helping AUD/USD sustain its upward momentum.

A 0.44% decline on Monday leaves the US Dollar Index (DXY) near 101.85. The index, which tracks the Greenback against six major currencies, is retreating even as expectations build for a Federal Reserve (Fed) interest rate increase.

Markets assign nearly an 80% probability to a 25-basis-point (bps) increase at the Fed's December meeting, according to the CME FedWatch tool. This pricing reflects US economic resilience and the Fed's commitment to returning inflation sustainably towards its 2% target.

October's Nonfarm Payrolls (NFP) gain of 165K adds support to that outlook. The increase comfortably surpassed the 65K forecast and September's 60K reading. The Unemployment Rate also fell to 4.1%, against expectations of 4.2%.

Tuesday's US Consumer Price Index report is the next focus for investors, with the Producer Price Index release due on Friday. If inflation exceeds forecasts, expectations for a December rate increase could strengthen. That could help the US Dollar recover and potentially put pressure on AUD/USD.

In geopolitical developments, US President Donald Trump downplays the prospect of fresh strikes on Iran. Qatar's Prime Minister is visiting Washington for talks intended to end the conflict. The developments are easing energy-market concerns: West Texas Intermediate (WTI) Oil is down more than 3% on Monday, trading near $86.85 at the time of press.

US Dollar movements and the forthcoming US inflation releases will therefore be central to AUD/USD's near-term path. The data could alter market expectations for the Fed's next monetary policy decision.

Australian Dollar: Today's Currency Performance

Today's percentage moves in the Australian Dollar (AUD) against the major currencies listed appear in the table below. Its largest gain was against the Swiss Franc.

	USD	EUR	GBP	JPY	CAD	AUD	NZD	CHF
USD		-0.59%	-0.56%	-0.35%	0.02%	-0.74%	-1.42%	0.06%
EUR	0.59%		0.03%	0.28%	0.60%	-0.15%	-0.84%	0.65%
GBP	0.56%	-0.03%		0.23%	0.57%	-0.18%	-0.87%	0.62%
JPY	0.35%	-0.28%	-0.23%		0.34%	-0.41%	-1.10%	0.39%
CAD	-0.02%	-0.60%	-0.57%	-0.34%		-0.76%	-1.44%	0.04%
AUD	0.74%	0.15%	0.18%	0.41%	0.76%		-0.69%	0.80%
NZD	1.42%	0.84%	0.87%	1.10%	1.44%	0.69%		1.50%
CHF	-0.06%	-0.65%	-0.62%	-0.39%	-0.04%	-0.80%	-1.50%

Percentage movements between major currencies are displayed in the heat map. Select the base currency in the left-hand column and the quote currency in the top row. For instance, choosing the Australian Dollar on the left and following its row across to the US Dollar gives the percentage change for AUD (base)/USD (quote) in the intersecting cell.