Aussie Dollar Braces for CPI Impact, Eyes on 0.6668 Surge

Key Takeaway

• AUD/USD poised for volatility post-US CPI report, with a significant drop after the last CPI and eyes on a potential rise beyond 0.6668.
• China's housing plan boosts yuan and investor sentiment, aiming to alleviate property sector pressures by purchasing unsold homes.
• Mixed Asian market responses to US CPI anticipation; commodities like copper and WTI crude oil see price increases, indicating tight supply.

Anticipation Surrounds Aussie Dollar Post-CPI

The Australian dollar (AUD) is poised for significant movement following the upcoming US Consumer Price Index (CPI) report, with potential volatility highlighted by recent market activities. The AUD/USD pair experienced a notable decline of 1.8% after the last CPI announcement on April 10, marking its most substantial drop this year. Current market dynamics suggest a keen eye on the AUD, especially with a large options strike at 0.66 expiring today, closely followed by this week's low at 0.6580, which could serve as a target for momentum traders.

Conversely, a weaker-than-expected inflation report may propel the AUD/USD pair beyond its March peak of 0.6668. The absence of significant option expirations above this level today could facilitate such a move, indicating the currency's sensitivity to inflation data and its potential impact on forex markets.

China's Housing Plan Bolsters Yuan

In response to China's proposed initiative to purchase unsold homes to address the housing surplus, the offshore yuan and Chinese shares have seen positive movements. This plan aims to alleviate pressures on the property sector, with local governments potentially buying millions of unsold residential properties. The details of the proposal, including its scale and timing, are yet to be disclosed, but investor sentiment has been uplifted by the prospect of substantial support for the beleaguered property market.

Mixed Responses in Asian Markets

Asian stock markets have exhibited mixed reactions as investors await the US CPI data, a key indicator of inflationary pressures that could influence global monetary policy decisions. Japan's Topix and Nikkei indices experienced gains, while Taiwan's Taiex index rose by 1.1%, overcoming disappointing earnings reports. However, trading in Hong Kong was paused due to a holiday, reflecting the varied investor sentiment across the region. This cautious optimism underscores the balancing act between regional economic developments and the anticipation of international economic indicators.

Commodities and Currencies Fluctuate

The commodities market has seen copper futures reaching record highs due to a short squeeze, signaling a tight supply situation. WTI crude oil prices have also increased, trading around $78.60, while gold prices have remained steady near $2,360. In the currency markets, the yen has held steady against the dollar, with the Australian and New Zealand dollars both appreciating by approximately 0.3%. These movements are closely monitored by investors for their potential implications on global trade and investment flows.