AUD Under Pressure Following US Inflation Beat and Yield Spike

AUD

The Australian Dollar opens sharply lower against the greenback at 0.6867, taking a hit across the board as hot US CPI data sparked an aggressive overnight rally in the US Dollar. The RBA’s cash rate hike to 4.85% last week and its warning of persistent inflation (>3% until late 2027) have failed to provide meaningful support against intense greenback momentum. Locally, the ASX 200 gained +1.1% yesterday, driven by strong outperformance in real estate and industrials (+2.2% each), while broader Asian indices closed higher (Nikkei +2.9%, Hang Seng +0.5%, Shenzhen +0.1%). Domestically, NAB’s October business survey showed business conditions dropping to their lowest level since 2020 and confidence slipping to -15, highlighting growing pressures on corporate margins. All eyes now turn to Australia’s October employment report next Thursday for the next major domestic policy clue.
 

USD

The AUD/USD pair dropped to 0.6867 as the US Dollar index surged 0.34% to 101.88 following stronger-than-expected October inflation data. US headline CPI printed at 0.4% m/m with core CPI rising 0.3% m/m for the third straight month, leaving markets more than fully pricing a 25bp Fed rate hike in December, while Fed Governor Christopher Waller flagged the potential need for a 50bp move. US Treasury yields surged in response, with the 10-year yield breaching 5.00% (up 10 bps on the day) and the 2-year yield jumping 17 bps to 4.73%. Wall Street sold off across the board under rate pressure, with the Nasdaq dropping 1.3%, S&P 500 -0.8%, and Dow Jones -0.5%. Markets now prepare for US Producer Price Index (PPI) figures due this Friday.
 

EUR

The AUD/EUR remains at 0.6150, though the Euro held up relatively better than the Aussie Dollar against broader USD strength. European share markets managed to close slightly higher despite the global inflation scare, with the CAC rising +0.6% and the DAX advancing +0.3%. Support for the Euro was bolstered by hawkish comments from ECB Chief Economist Philip Lane, who noted it would be "prudent" to consider a rate hike in December if macroeconomic conditions remain unchanged. Eurozone Q3 GDP and employment figures scheduled for Friday remain the key upcoming catalysts for the pair.
 

GBP

The AUD/GBP pair traded virtually flat overnight at 0.5146, as Sterling declined alongside the Australian Dollar against the surging greenback (GBP/USD down 0.71% to 1.3346). UK equity markets felt the burn of broader global risk aversion, with the FTSE 100 selling off -0.3%. Sterling’s underlying yield advantage remains anchored by the Bank of England's recent rate hike to 4.00%, which keeps UK rate expectations elevated relative to European peers. Market focus now shifts to Thursday night's monthly UK GDP print for further economic direction.
 

NZD

The AUD/NZD pair opens lower overnight at 1.2255, hitting another 3-week low. The Kiwi Dollar remains supported by domestic political resolution expectations following Saturday’s parliamentary election, where Prime Minister Christopher Luxon’s coalition holds a narrow lead with final special votes expected by November 27. On the economic front, ANZ’s Truckometer Index showed New Zealand light traffic activity ticking up slightly in October (+0.2% m/m) but remaining down -1.7% year-on-year, pointing to sluggish underlying economic activity. Cross-currency focus will be on the upcoming NZ Visitor Arrivals m/m being released early tomorrow morning, which previously increased by 2.8%.