Written by Steven Dooley, Head of Market Insights, and Shier Lee Lim, Lead FX and Macro Strategist
Aussie jumps after US inflation falls
The Australian dollar was one of the best performers overnight with the AUD/USD up 1.6% after a lower-than-expected inflation number caused the US dollar to fall.
The rebound saw the AUD/USD less than 1.0% away from five-month highs.
US annual headline inflation fell from 2.4% in March to 2.3% in April while the core reading was steady at 2.8%.
The NZD/USD also gained strongly with NZD/USD up 1.6%.
Chinese yuan stronger as trade tensions cool
In other market, the cooling from trade tensions was the key driver after the US reduced import duties to 30%, which includes 20% fentanyl duties and 10% universal duties.
Other universal tariffs have not changed, such as the 25% on steel and aluminum and the 25% on automobiles and car components.
To facilitate more discussions, 24% reciprocal tariffs will be halted for 90 days.
The weighted average duty on all imports is reduced from 24% to 15%, while the weighted average tariff on imports from China is reduced from 100% to 35%.
Conversely, China suspends a further 24% of reciprocal duties for 90 days and reduces them to 10% on US imports.
China, meanwhile, stated that it will take the required actions to halt or revoke non-tariff countermeasures against the United States.
The USD/CNH is now more than 3% away from this year’s peak of 7.4290.
The USD/CNH has fallen back to six-month lows, but with the pair still in a long-term uptrend, the path of least resistance is higher in the medium term.
Fed Gooslbee still worried about stagflation
Ahead of last night’s inflation reading, Chicago Federal Reserve President Goolsbee told The New York Times that he believes the tariffs will continue to cause stagflation and that the deal’s short-term character may harm the economy.
Goolsbee continues to believe that the Fed should wait and watch.
Looking at APAC FX, the USD/SGD has edged back up as we’ve been highlighting the potential strength earlier.
The next key resistance levels for the pair is 21-day EMA of 1.3077 and 50-day EMA of 1.3199 next.
USD lower after CPI
Table: seven-day rolling currency trends and trading ranges
Key global risk events
Calendar: 12 – 17 May
All times AEST
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*The FX rates published are provided by Convera’s Market Insights team for research purposes only. The rates have a unique source and may not align to any live exchange rates quoted on other sites. They are not an indication of actual buy/sell rates, or a financial offer.