Forex Today – 31/01: Aussie Inflation Drop Spurs Stocks

Australian inflation is falling faster than expected, raising hopes of quicker monetary easing, boosting Australian stocks, and weakening the Aussie Dollar.

1. Australian CPI (inflation) data showed a drop in the annualized rate over the past quarter from 4.3% to 3.4%, notably lower than the 3.7% which was widely expected. This news raised expectations that the Reserve Bank of Australia will undertake monetary easing more quickly, heightening hopes for faster rate cuts. This weakened the Australian Dollar and sent the Australian ASX 200 Index to close at a new all-time high price, which will be of interest to trend traders.
2. Markets are awaiting the US Federal Reserve’s policy meeting later but seeing virtually no chance of a rate cut. There will also be releases of German Preliminary CPI, the ADP non-farm payrolls forecast, Canadian GDP data, and the US Employment Cost Index.
3. US stock markets have fallen over the past day, but both the NASDAQ 100 Index and the S&P 500 Index are close to record highs.
4. Crude Oil is consolidating near a 2-month high price as tensions rise in the Red Sea and the Indian Ocean following the fatal attack on US forces in Syria/Jordan, which is expected to draw US retaliation soon. This could see the price of crude oil spike when it happens, although the US will likely be careful not to escalate tensions much.
5. In the Forex market, the US Dollar has been the strongest major currency since the Tokyo open today. The Australian Dollar has been the weakest, putting the AUD/USD currency pair in focus. The greatest volatility recently has been seen in the USD/JPY currency pair. The Japanese Yen has been attracting some safe haven flow.
6. Bitcoin has continued its recovery after support below the big round number at $40,000 some days ago, but it is struggling to break above resistance near $43,300.
7. Cocoa futures reached a new multi-year high price yesterday, which will keep trend traders interested in this commodity on the long side. It has been exhibiting a powerful bullish trend for well over one year.