- AUD/USD is losing traction to near 0.6730 during Monday’s early Asian session.
- Weaker economic data from China weakens China’s proxy AUD.
- The American PPI index supports expectations of a Fed interest rate cut next month.
The AUD/USD pair is drawing some sellers towards the 0.6730 area during the early Asian session on Monday. A stronger US dollar (USD) and deflationary pressures in China are putting some selling pressure on the major pair. Traders will draw more conclusions from China’s trade balance data, which will be released later on Monday.
Weaker-than-expected consumer and factory prices in China in September weigh on the Australian dollar (AUD) as China is Australia’s main trading partner. Data released by China’s National Bureau of Statistics on Sunday showed the country’s consumer price index (CPI) rose 0.4% y/y in September from 0.6% in August. This result was lower than the market consensus of 0.6%. Meanwhile, the producer price index (PPI) fell by 2.8% y/y in September, compared to -1.8% earlier, which is weaker than the expected level of -2.5%.
On the other hand, PPI data in the US reinforce expectations of a 25 basis point reduction in Federal Reserve (Fed) interest rates in November, which may limit the dollar’s growth. US PPI was unchanged in September, while core PPI increased by 0.2% over the same period.
The annual PPI rose by 1.8% in September, following a 1.9% raise recorded in August, and was above market expectations of 1.6%. Annual core PPI rose 2.8% over the same period, topping analyst estimates of 2.7%. According to the CME FedWatch Tool, swap markets indicate the Fed has a 95.6% chance of cutting rates by 25 basis points, down from 83.3% before the PPI data.
According to the BBC, the Israel Defense Forces (IDF) said on Sunday that four soldiers were killed and more than 60 others injured in a drone attack on a military base in northern Israel. Hezbollah claimed responsibility for the attack. Rising geopolitical tensions in the Middle East may raise flows to protected havens, benefiting the US dollar.
