Australian Dollar holds steady amid soft consumer sentiment

AUD/USD remains steady after two days of gains, trading around 0.6970 during Asian hours on Tuesday. The currency pair is hovering in a tight range as the Australian Dollar (AUD) finds support despite local economic headwinds. The Westpac–Melbourne Institute Consumer Sentiment Index dropped 4.7% month-over-month in October, marking its second consecutive monthly drop, though it showed a minor improvement over September’s 5.2% decline.

Meanwhile, the US Dollar (USD) is keeping its ground against major rivals amid shifting commodity and inflation dynamics. A retreat in oil prices, driven by signals of expanding supply out of the Middle East, has helped soothe market anxiety over rising inflation and the likelihood of tighter monetary policy.

Global efforts to bolster energy supply have contributed significantly to this price drop. Following pressure from US President Donald Trump, G7 nations agreed on Friday to tap into emergency reserves and release 100 million barrels of crude and diesel while pledging not to restrict energy exports. Tracking data indicates this release will supplement Middle Eastern crude exports, which surged past pre-war levels during most of the final week of September.

Nevertheless, fresh geopolitical flare-ups in the region could reignite safe-haven demand for the US Dollar. According to Xinhua News Agency, Yemen’s Houthi group claimed responsibility on Monday for launching coordinated attacks using drones, ballistic missiles, and cruise missiles against Saudi Arabian military installations, an oil facility, and key airports. Houthi spokesman Yahya Saree stated that one of the strikes successfully hit King Khalid International Airport in Riyadh, disrupting air traffic and injecting new tension into global markets.

HSBC highlights profit-led dynamics behind stubborn US inflation

Strategists at HSBC argue that US inflation, which “remains high” and is often blamed on “surging oil and computing costs, as well as the lingering impact of tariffs,” looks different when viewed through the lens of the gross value-added deflator. This measure, they note, captures inflation generated by “profits, wages, and non-labour related costs” and “offers a different perspective.” On this basis, HSBC finds that “the latest acceleration in headline inflation appears to have been driven mainly by stronger profit growth,” rather than solely by traditional cost pressures.