Forex Top Team

AUD Strong as Rate Cuts Seem Distant Alongside USD

The Australian dollar (AUD) is showing strong performance today, bolstered by higher-than-expected May consumer price index (CPI) data. Market sentiment includes expectations of a rate hike, leading to noticeable buying of AUD against major currencies. Similarly, yesterday’s unexpectedly strong Canadian CPI results strengthened the Canadian dollar (CAD). Both AUD and CAD are showing resilience comparable to the US dollar (USD).

In contrast, the euro (EUR) and British pound (GBP) continue to face high pressure for rate cuts within the year. The European Central Bank (ECB) followed the Swiss National Bank in deciding on a rate cut at its June meeting. Today, Olli Rehn, Governor of the Bank of Finland, indicated that based on current data, another two rate cuts this year seem likely, calling this a reasonable outlook. The Bank of England is also considering a rate cut in August. Both currencies are also surrounded by political instability, warranting caution.

The Japanese yen (JPY) remains weak. Bank of Japan Governor Ueda has not provided specific messages regarding the timing of a rate hike, focusing instead on hypothetical discussions. The decision on reducing government bond purchases, a subsidiary monetary policy, was deferred to the next meeting. This year’s performance shows yen weakness against the dollar comparable to the Chinese yuan and Turkish lira.

Cross trading among major currencies is likely to become more active going forward.

Upcoming economic indicators to be released in overseas markets include the MBA Mortgage Applications Index (for the week of June 15-21) and May New Home Sales data from the US.

In terms of speaking events, several ECB officials, including Centeno (Portugal), Panetta (Italy), Lane (Chief Economist), and Kazāks (Latvia), are scheduled to speak. In the US, the Weekly Petroleum Status Report and a $70 billion 5-year note auction are also on the agenda.

Yesterday’s strong Canadian CPI and today’s higher Australian CPI are pushing back the prospect of rate cuts. Both AUD and CAD are seen as buy opportunities.

USD is also rising today, with USD/JPY entering the 160-yen range. This pair is also viewed as a buying opportunity.

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12th in July 2024, Today’s Options

EUR/USD: EUR amounts 1.0650: €1.8 billion 1.0690: €1.1 billion 1.0695: €873 million 1.0700: €896 million 1.0800: €1.7 billion 1.0850: €2.4 billion 1.0900: €934 million USD/JPY:

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