AUD steady in face of rising global rates

Key Movers

The US dollar fell through trade on Monday, marking a fourth consecutive daily depreciation as the Euro found momentum and the Pound failed to build on Friday’s gains. Domestic macroeconomic data was mixed on Monday with industrial production falling thanks to the impacts of Hurricane Ida while confidence among the housing sector continues to improve. The Euro pushed back through 1.16 touching intraday highs at 1.1620 while the GBP fell back below 1.3750. Markets continue to bring forward estimates for a UK rate hike, with most now anticipating policy makers will raise rates as early as next month in an attempt to avoid rising inflationary pressures. With the UK economic recovery so fragile there is a real fear early monetary policy adjustment and a tightening of interest rates will only derail any post delta rebound and have little impact on controlling supply driven price increases. If we learnt nothing from the 1970’s stagflation crisis raising interest rates alone does little to control inflation. We are keenly attuned to any BoE rhetoric that hints as to what the MPC will do in November. Our attentions today turn to yearly UK CPI data as a key metric driving direction while commentary from key FOMC policy makers could provide further forward guidance ahead of the Fed policy meeting next month.