Daily Currency Update
The Australian dollar outperformed major counterparts through trade on Monday, extending back through US$0.70 amid a sustained recovery in risk appetite. With little headline newsflow and top-tier macroeconomic data points on hand to drive direction, market attention remains affixed to US monetary policy expectations. Investors are seemingly encouraged by the recent downward shift in inflation pressures and subsequent US rate expectations, fueling gains across equities and key risk assets. The AUD was dragged higher through trade on Monday, following stocks upward and marking new highs just north of US$0.7040. The Test now, can the AUD consolidate and extend this recent push into a weekly close above resistance? Our attention turns to domestic CPI inflation data tomorrow as a key marker of near-term direction. While inflation begins to ease across key counterpart economies domestic price pressures remain sticky. Another surprise uptick in the Consumer Price Index could force the RBA to reconsider any break in the current rate hike cycle and add a near-term floor under the AUD.
Key Movers
Price action across majors was mixed through trade on Monday as the euro marked fresh nine-month highs while the yen met sustained downward pressure. The USD extended its recovery against the yen, pushing back above 130 amid an improved global rates backdrop and continued shorting of the yen following last week’s Bank of Japan policy meeting. Markets had anticipated the BoJ would announce changes to its outdated yield curve control policy and policymakers’ decision to stay the course has forced markets to re-adjust short-term rate expectations and rewind recent JPY gains. The euro surged towards fresh nine-month highs, breaking through 1.09 to touch 1.0925 before slipping back towards 1.0850 amid improved USD demand. The GBP failed to hold onto rallies beyond 1.24, slipping back below 1.2350, before finding support and moving back towards 1.2360 leading into this morning’s open. Attention now turns to a slew of PMI data. We expect activity to have slowed across the US and UK while European data should point to improved activity. An uptick in European PMI could help the single currency consolidate a break above 1.09 as the focus shifts to next week’s Fed and European Central Bank policy updates.
Expected Ranges
- AUD/USD: 0.6870 – 0.7060 ▲
- AUD/EUR: 0.6380 – 0.6520 ▲
- GBP/AUD: 1.7480 – 1.7820 ▼
- AUD/NZD: 1.0750 – 1.0880 ▲
- AUD/CAD: 0.9320 – 0.9420 ▲
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