AUD lifted as global reflation narrative extends into new week
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Daily Currency Update
The Australian dollar outperformed through trade on Monday as analysts extended last week's reflation narrative. An absence of a new catalyst to perturb direction allowed the AUD to climb back through US$0.66, buoyed by an extension in key commodity prices.A near 1% gain in copper prices helped drive prices across industrial metals and lift demand for the AUD, while a stronger yuan fixing and marginally improved China outlook helped underpin gains. The AUD continues to provide resistance to extensions in US treasury yields and delayed Fed rate cut expectations, maintaining a narrow range and testing resistance on moves approaching US$0.6650.
Stronger-than-expected domestic housing finance could force the RBA to delay any thoughts of a rate cut while emerging signs the global economy is recovering faster than expected help contain USD gains. Our attentions turn now to Wednesday night's US CPI print, a critical marker in shaping Fed pricing expectations, rates and near-term AUD ranges.
Key Movers
Price action has been well contained through trade on Monday as markets look to extend last week's themes in the absence of new catalysts that might otherwise disrupt direction. US treasury yields marked fresh year-to-date highs and the likelihood of a Federal Reserve Rate cut in June faded as markets delayed expectations for policy change into August, pricing just 63-basis points of cuts into the end of the year, suggesting markets are divided in predicting 2 or 3 rate adjustments.Against a backdrop of higher rates, the Japanese yen underperformed, sliding toward 152, before meeting resistance amid intervention fears. The spectre of the Bank of Japan and Ministry of Finance (MoF) intervention continues to hang over USD/JPY, as markets are not yet ready to test officials, extend ranges and force the hand of the MoF.
While up against the JPY, the USD is lower against the EUR, GBP and CAD, though moves have been contained within a narrow range. Last week's global reflation narrative continues to prop up commodity currencies with the NOK, AUD and NZD outperforming.
Expected Ranges
- AUD/USD: 0.6550 - 0.6650 ▲
- AUD/EUR: 0.6020 - 0.6120 ▲
- GBP/AUD: 1.9050 - 1.9350 ▼
- AUD/NZD: 1.0900 - 1.1000 ▲
- AUD/CAD: 0.8920 - 0.9020 ▲