Daily Currency Update
The Australian dollar edged lower through trade on Wednesday, giving up highs above US$.6550 amid a stronger US data set and USD rebound. The AUD continued to test resistance on moves approaching US$0.6590, buoyed by commentary from RBA chair Michelle Bullock. Bullock adopted a hawkish tone, noting the inflation challenge is becoming increasingly “homegrown” and a tightening of monetary policy will be the right response. Bond yields rose as the AUD tracked higher before stronger-than-anticipated US jobs data and inflation forecasts forced investors to pare gain. US jobless claims fell through last week, reversing a string of upward moves while inflation expectations data showed year on year inflation is expected rise, surprising investors and prompting an uptick in US yields. With US treasuries rising, the AUD slipped toward intraday lows below US$0.6540 as our attentions turn toward European and US PMI data. With the market hypersensitive to anything that might disrupt or shape the Fed narrative we are keenly attuned to US data sets for direction into the weekly close.
Key Movers
Higher US treasury yields helped the USD pare recent losses and propel the DXY index higher. The Dollar index advanced four tenths of a percent following a fall in jobless claims and an uptick in the University of Michigan’s inflation expectations report. With the USD on the front foot, the euro slipped back below 01.09 while Sterling gave up 1.25 and the USD pushed back above 149.50 against the yen as the higher rates backdrop put pressure on the yen. The outsized market response to second tier data shows just how sensitive the market is to anything that may impact the Fed monetary policy cycle. With markets closed for Thanksgiving today, our attentions turn to European PMI data and US PMMI data Friday for direction into the weekly close. Thin trading volumes could drive elevated volatility should data sets print significantly outside expectations.
Expected Ranges
- AUD/USD: 0.64 - 0.66 ▲
- AUD/EUR: 0.5950 - 0.6050 ▲
- GBP/AUD: 1.8900 - 1.9300 ▼
- AUD/NZD: 1.0800 - 1.0900 ▲
- AUD/CAD: 0.8880 - 0.9020 ▼