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Australian Dollar Update, February 6th, 2022

The Australian Dollar finished the week above 0.70c closing on Friday at 0.7073 after the Non-farm payroll figures from the US came out late on Friday and exceeded expectations. The AUD/USD exchange rate fell 0.90% on Friday evening, after a positive start to the week.

After finishing last week at 0.6990 from the news that the US Fed were looking at 5 potential rake hikes through 2022 and 2023 the USD had a very strong run, however after a couple of the Fed members made comments about how many they supported the USD seen a sell off during the week. The AUD/USD had reached a high of 0.7168 before Fridays backward move.

A lower AUD/USD paired with a 4-year low USD/CNY means potentially more pain for importers as Chinese suppliers have to keep their safety net in place. The USD did gain some ground on the CNY, however still sits at its lowest point since May 2018.

The issue we have here is that Chinese suppliers will add in a "buffer" to cover their local costs and then pass that on to their customers which in turn are being hurt by this price, the AUD/USD at around 0.70c and then high shipping costs. All of this adds up for local importers and are no doubt feeling the pressure on pricing.

There are a couple of solutions to try and combat these issues, so feel free to contact us to discuss.

The week ahead brings several high tier announcements, mainly from the US later in the week, Friday will see a raft of US data released and after the market closes we will see the Fed's monetary policy report from their latest meeting.

Locally we will see Chinese Services PMI figures released and then on Thursday we have the Australian Consumer Inflation Report, this will give a gauge as to how the RBA continue to monitor future interest rates rises, which are now being spoken about for 2022 locally.

Another big week ahead to see if the AUD/USD exchange rate can hold the 0.70c mark again, after a good start to the week, Fridays sell off is a concern as it moves back into that dangerous territory.

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