AUD marks new 2023 low as US data surprises and China worries continue

Key Movers

The US dollar advanced against most counterparts Friday, buoyed by a stronger than anticipated US PPI report. Data for July showed producer price pressures increased 0.3%, a tenth of a percent faster than anticipated, meaning annual inflation remained steady at 2.4%. Analysis suggests the increase in producer costs has been driven by the services sector with labour costs and input goods costs flat across the month. With US consumer sentiment stable the uptick in leading inflation data helped propel US yields upward, dragging the US dollar higher across the board. The Euro slipped below 1.10, while the Yen broke key Psychological supports at 145 and now sits just below the June high. Ongoing and sustained JPY weakness will likely invoke action from Japanese policy makers. Officials have shown a penchant for intervention at these levels and skirmishes designed to support the beleaguered Yen will hardly surprise market participants. With most majors struggling against the stronger dollar backdrop the GBP outperformed. UK yields rallied following stronger than anticipated Q2 GDP data. An uptick in quarterly GDP growth lifted expectations for the terminal Bank of England base rate, suggesting policy makers will lift rates by a further 50 basis points across two more rate hikes. The promise of higher yields and easing growth concerns helped drive GDP gains across the board with Stirling making new three year highs against the AUD and NZD.