International Update 🌍

U.S. Inflation & Economic Outlook 📉
Last Friday, the latest U.S. inflation data showed that the Consumer Price Index (CPI) in September increased by 2.4% year-on-year, slightly lower than the previous 2.5% but still above the expected 2.3%. This is the lowest CPI reading since February 2021, mainly due to falling energy prices. On a monthly basis, CPI rose by 0.2%, in line with expectations and the previous value.

This inflation data, combined with a strong U.S. jobs report from last week, may fuel discussions about whether the Federal Reserve will opt for a small interest rate cut next month or pause after a significant rate cut in September. The Fed plans to lower rates by 0.5% before the end of the year, and many are focusing on developments in the labor market. Following the release of the data, U.S. stock index futures and Treasury yields fell. Traders are now betting that the Federal Reserve is more likely to cut rates by 25 basis points next month.

The U.S. dollar index has been fluctuating this week, dropping about 0.1% to 103.21. It formed a “W” pattern. Former U.S. President Donald Trump’s remarks on his policies to boost economic growth and his tariff plans briefly pushed the dollar higher. Meanwhile, non-U.S. currencies experienced varying levels of decline, with the offshore Chinese yuan falling nearly 400 points against the U.S. dollar to 7.1350, its lowest in a month, currently hovering between 7.091 and 7.143.

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Australia Update 🇦🇺
Aussie Dollar Weakens Slightly as U.S. Dollar Strengthens 💵
The U.S. dollar has been strong, putting pressure on commodity currencies, including the Australian dollar (AUD), which has fallen about 0.4% to around 0.6701 USD. The recent decline in commodity prices and a stable U.S. dollar continue to weigh on the AUD.

RBA Assistant Governor Christopher Hunter stated that inflation expectations are still well-anchored, but it is essential to track the evolution of these expectations. This suggests that Australia’s high interest rates might ease slightly in the future. With the U.S. dollar maintaining its strength, the Australian dollar faces limited upside, especially as Australia remains an export-driven economy, and global demand slowdown is a significant risk.

From a technical perspective, the 5, 10, and 21-day moving averages are all trending downward, creating resistance. The AUD continues to move along the lower Bollinger Band. The main support levels are at 0.6627 (200-day moving average) and 0.6622 (September low). If the AUD closes below 0.6620, the next target is the 61.8% retracement of the August/September gains at 0.6575. The 21-day moving average and recent high points near 0.6804/10 are strong resistance levels for any potential rally.

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