Marketwatch APAC

The AUDUSD dropped heavily through 0.64-cents after the US reported an above expectations release of September Consumer Price Index (CPI). The monthly headline number rose by 0.4%, while 0.3% was expected, driven by gasoline prices. The core CPI annually decelerated to 4.1%, as was expected. The continuing decline in core CPI and deepening Middle East geo-political tension will provide latitude for the US Fed to hold rates unchanged, albeit higher for longer, though markets have been quick to start pricing in further hikes. US Treasury yields have rallied , stock markets have dropped and commodity currencies have suffered, as investors recycle out of risk assets once again. The AUDUSD has borne the brunt of the move by the majors against the US-dollar, falling 1.6% for the session, with NZD, GBP and EUR also weakening against the dollar. There is no data due out locally today, so markets will be attentive to the release of China Inflation and Trade numbers for direction. With the AUDUSD opening the Asia day in the low 0.63’s teetering near the October lows, with any further deterioration in risk a catalyst to test lower. Alternatively, consolidation of trading above 0.63-cents will inspire a rebound to 0.6345/55 and gains above will be needed to negate the downside pressure. The Middle East conflict and developments, will also demand attention for traders.

Wall Street indices dropped on the US CPI release overnight and as US Treasury bond yields rallied investors were eager to recycle out of risk assets. In afternoon trading, the DJI was down -0.5%, the S&P500 also down -0.6% and the Nasdaq slipped lower by -0.6% into the close. Australian shares are looking to open lower, in line with the losses on Wall Street as investors re-evaluate the chances of more rate hikes from the Fed.

Gold prices fell by 0.3% for the day as US Treasuries were once again preferred for yield and the US-dollar gained.

Copper prices fell 0.5% as inventory stockpiles hit their highest in two years, slackening the supply constraints that have been impacting the cycle, as expectations for demand in future years grows with the expansion of renewables.

Brent Crude Oil prices eked out a tiny gain for the session, adding 18 cents to $86.00/bbl , while US Prices softened on the report of a larger than expected build up of crude stockpiles for the week, all-the-while as traders remain attentive to any supply disruptions stemming from the conflict in the Middle east.

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