The rise in core PPI to higher-than-expected results of 0.6% has seen US ten-year bond yields move higher to 4.776% from 4.762% prior to the number. But the rise in yields has been tempered by the large 1.3% slump in the headline number which so far, has left AUD steady around 0.7533.
The tight price action may suggest option interest with a 0.7550 barrier already cleared in the move up overnight. The Fed is likely to keep focused on core inflation however which leaves the bias for higher rates intact and still positive for the USD which should temper AUD gains today.
The next move for AUD will depend on the metals markets today and the follow-through reaction from the bonds. The Treasury International Capital data or TIC may not have much impact since the sharp rise in custody holdings to record highs last week still shows that foreign central banks are accumulating the USD. Bids remain at 0.7530.
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