While the Australian dollar is surging above 68 cents to a new monthly high against USD due to the latest soft US CPI print, it needs to be reiterated that the Pacific Peso is still on a dominant downtrend. Not just against King Dollar, but on the crosses too with Pound Sterling leading the charge.
First, to put into context the last couple weeks of upside action against USD, the monthly trend remains down from the 2020 highs:
Pound Sterling is now at a two year high versus the Aussie due to the UK’s own domestic inflation issues which surpass the RBA’s mishandling here. As the CBA notes in a recent report “The UK is in a wage‑price spiral. Wage growth feeds off high inflation, and inflation feeds off high wage growth which will need to ease in a range of 3%‑4% to sustainably bring inflation down”.
With wages growing at nearly 7% recently, this is keeping Pound Sterling appreciating against both USD and AUD:
With Euro lifting higher as well, now at a one year high (horizontal black line in weekly chart below) versus Aussie dollar as the EU is still troubled by its own inflationary spiral:
The buck doesn’t stop across the ditch either with a double top now fully formed on the weekly Aussie/Kiwi cross, which could send it back down to the 2022 lows at the 1.04 handle (just in time for my upcoming holiday!)
The RBA remains caught between a rock and Martin Place insularity so another pause next month is likely to see these trends accelerate and keep travellers at home.