AUDUSD jumps to two-week high amid softer US Dollar, hawkish RBA Governor Lowe

Market sentiment improves on early Wednesday as traders see a sooner rate hike peak at major central banks amid mostly downbeat data and looming fears of economic slowdown in China and Germany. Hopes of stabilizing US-China ties add strength to the cautious optimism.

While the mildly positive sentiment weighed on the US Dollar, the RBNZ’s pause to a non-stop rate hike trajectory since October 2021 allow the NZDUSD to remain firmer. That said, AUDUSD cheers hawkish comments from RBA Governor Philip Lowe while ignoring warnings from Aussie Treasurer Chalmer.

USDJPY leads the G10 gainers versus the US Dollar as softer Japan PPI gives credence to BoJ policymakers’ defense of easy-money policy.

Elsewhere, crude oil fails to improve after refreshing 10-week high but prices of gold remain firmer. Additionally, shares in the Asia-Pacific zone trade mixed, mostly lower, even if US stock futures follow a mildly positive Wall Street closing.

Cryptocurrencies are also slightly positive as institutional funding defends the bulls even as regulatory fears check the optimism.

Following are the latest moves of the key assets:

• Brent oil retreats from 10-week high, mildly bid near $79.40 by the press time.
• Gold price prints minor gains around $1,935, at three-week high as we write.
• USD Index remains depressed at the lowest levels in two months, around 101.50 at the latest.
• Wall Street closed with minor gains and probed the Asia-Pacific optimists while equities in Europe and UK are mildly bid by the press time.
• BTCUSD and ETHUSD print minor gains to around $30,750 and $1,890 as we write.

Mixed mood prevails on US inflation day

Traders appear cautiously optimistic as markets await the key US CPI data amid hopes of witnessing a sooner pause to the Fed’s rate hike trajectory, followed by rate cuts. Adding strength to the slightly positive sentiment could be the Reserve Bank of New Zealand’s (RBNZ) inaction, as well as BoJ’s defense of ultra-easy monetary policy. Further, a likely positive turn of the US-China ties and an absence of major calamities in the Russia-Ukraine front also favor the sentiment. It should be noted that RBA Governor Philip Lowe’s hawkish comments keep the AUDUSD on a firmer footing despite the Aussie Treasurer's warning of a sharp economic slowdown.

Alternatively, downbeat statistics from the major economies join impending fears of a recession in China and parts of Europe keeping traders on their toes.

On a different page, crypto traders remain hopeful of witnessing steady cash flow from the major players, per the latest trend, as well as observing the upbeat pattern of Bitcoin mining, to stay positive. Further, more ETF applications from notable institutions also favor the slightly upbeat sentiment.

• Strong buy: USDCAD
• Strong sell: ETHUSD, GBPUSD, Gold
• Buy: USD Index, Nasdaq, USDJPY
• Sell: DAX, FTSE 100, BTCUSD, AUDUSD, EURUSD

US inflation, BoC moves are the key

Looking ahead, traders are more interested in the US inflation numbers, mainly the Consumer Price Index (CPI) and the Core CPI for clear directions. Also important to watch will be the Bank of Canada (BoC) interest rate decision and some second-tier data from Europe.

While softer US inflation is widely expected, a strong number can validate the hawkish comments from the Fed policymakers and can allow the US Dollar to lick its wounds, especially after refreshing a two-month low earlier in the day.

On the other hand, the BoC is likely to announce a 0.25% increase in the benchmark rates and may help the CAD to rise further. Though, the latest retreat in the Oil price and anticipated recovery in the US Dollar post-US inflation can prod the USDCAD bears. In a case where the BoC surprises markets by keeping the rates unchanged, the Loonie pair may witness the much-awaited rebound.

Elsewhere, riskier currencies may grind higher unless the US inflation offers a strongly positive surprise.

May the trading luck be with you!