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European Central Bank (ECB) President Christine Lagarde spoke over the weekend at the International Monetary Fund’s annual meetings in Marrakech, Morocco. Lagarde stated that underlying inflation in the eurozone is still strong and wage growth is “historically high”.

Key quotes

Market reaction

The comments above has little to no impact on the Euro. At the time of writing, EUR/USD is trading near 1.0518, holding higher while adding 0.07% on the day

US and Israeli officials have discussed the potential of US President Joe Biden visiting Israel shortly at the invitation of Israeli Prime Minister Benjamin Netanyahu, an unnamed source told Reuters on Sunday.

Israel has been signaling that it is making preparations for ground operations in Gaza despite the escalating humanitarian crisis within the coastal Palestinian enclave. Biden has called for civilian protection, and the US has been working to alleviate food, water, and petroleum shortages.

• AUD/USD holds above the 0.6300 psychological support in early Monday.
• The escalated geopolitical tension, downbeat Chinese CPI data weigh on the Aussie Dollar.
• US Michigan Consumer Sentiment Index is softer than expected; inflation expectations for one year rose from 3.2% to 3.8%.

The AUD/USD pair remains on the defensive during the early Asian session on Monday. Risk sentiment will dominate the pair ahead of the US Retail Sales and the Reserve Bank of Australia (RBA) Meeting Minutes on Tuesday. The pair currently trades near 0.6305, up 0.15% on the day.

On Friday, the National Bureau of Statistics of China revealed that the Chinese Consumer Price Index (CPI) for September came in at 0% YoY from the previous reading of 0.1%, worse than the market consensus of 0.2%. The Producer Price Index fell to 2.5% from a 3% drop in August, missing the expectation of a 2.4% decline. The Chinese readings show that the economy is still struggling despite the latest government stimulus plan to boost the nation in meeting its 5% growth target.

Furthermore, the escalated geopolitical tension in the Middle East continues to exert pressure on the risk-perceived currencies, like the Aussie Dollar (AUD), and acts as a headwind for the AUD/USD pair.

On the USD’s front, the upbeat US inflation report has prompted investors to price in a possible rate rise by the Federal Reserve (Fed). The US Consumer Price Index (CPI) annually and monthly for September came in at 3.7% and 0.4%, respectively. Both figures exceeded the market expectations.

On Friday, the preliminary US Michigan Consumer Sentiment Index for October eased to 63.0 from the previous reading of 68.1, worse than expected of 67.4. Meanwhile, Inflation expectations for one year rose from 3.2% to 3.8%, while for five years jumped to 3% from 2.8%. In the meantime, the US Dollar (USD) remains to benefit from the safe-haven flow amid the rising geopolitical tension between Israel and Palestine.

Looking ahead, geopolitical tension remained the focus for the pair. The US Retail Sales for September will be due on Tuesday, with the figure expected to rise 0.2%. On the Australian docket, the Reserve Bank of Australia (RBA) Meeting Minutes, RBA Bullock’s speech and Australian employment data will be released this week. Traders will take cues from these figures and find the trading opportunities around the AUD/USD pair.