Title : AUD/USD finds fresh demand below 0.6250 as risk-on profile emerges, US Inflation buzz

OCT 12, 2022 02:09 AM ET

By: AnalysisWatch

AUD/USD has firmly defended the bearish bias after sensing a decent amount of buying interest around 0.6240. The asset has extended gains to near 0.6280 as risk momentum has emerged.

Investors are shrugging off Federal Reserve (Fed) pessimism and betting on risky currencies.

The US dollar index (DXY) aims to retest Tokyo's knee-jerk reaction to near 113.00, as investors are shedding the safe haven after failing to hold around new weekly highs at 113.60.

This week, the most important event will be the US consumer price index (CPI) data, which will be released on Thursday. According to market expectations, the US headline inflation rate could slow to 8.1%, while the core CPI, which does not take into account oil and food prices, could rise by 6.5%.

Of note, September's employment data was upbeat. US nonfarm payrolls (NFP) came in at 263k, above the expected 250k. In addition, the unemployment rate declined to 3.5%. If the inflation rate accelerates further, the odds of a further rate hike by the Fed will shoot up sharply. The deadly duo of payroll data and rising price pressures will leave the Fed with no choice but to continue with the current pace of rate hikes.

On the Australian front, Reserve Bank of Australia (RBA) Deputy Governor Luci Ellis has called the neutral rate a guide for policy, not a destination, indicating that the central bank's target official cash rate (OCR) of 3.85% could be tightened further. He also stated at the Citi Australia and New Zealand Investment Conference that inflation expectations for next year will remain well-anchored in the 2-3% range.