AUD unmoved as few surprises from US inflation update
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Daily Currency Update
The Australian dollar opens this morning in much the same position showing little net change, despite overnight volatility leading into and out of key US inflation data. Having opened below US$0.65, the AUD maintained a narrow trading range for much of the domestic session before jumping through US$0.65 and toward intraday highs at US$0.6528 following the release of the US PCE deflator index. Core and headline measures printed in line with expectations, sparing markets another nasty inflation surprise and immediately added downward pressure on the USD. The move was, however, short lived with markets unwinding the move, allowing the USD to recoup losses and finish the day higher forcing the AUD back below US$0.65 and an open price near US$0.6495.With little change in US rate expectations and key commodity prices under pressure the AUD remains vulnerable to near-term downside and a test of the February low at US$0.6443. Our attentions today turn to China PMI data, Euro area CPI data and US manufacturing data for direction into the weekly close.
Key Movers
The US dollar closed the day higher against most counterparts despite a downturn in yields and a PCE deflator print in line with market estimates. The much-anticipated inflation update afforded investors some relief in printing more or less as anticipated, sparing analysts another unwelcome inflation surprise. Core PCE rose 0.4% through the month and sits at 2.8% year on year, affirming the unhelpful uptick seen in January raising questions as to whether the disinflation trend may be faltering. While US yields and the dollar tracked lower immediately following the update, the dollar bounced back, forcing the euro below 1.08 and the GBP near 1.26, off highs just short of 1.2680. In contrast the Japanese yen outperformed, forcing the USD back below 150 and as low as 149.27, following comments from Bank of Japan board member Takata supporting a shift in monetary policy and a move away from yield curve controls and negative rates. The comments contrast those made in December where Takata was at pains to stress the need to remain patient in amending policy and that large scale easing was still required. Having forced the USD lower, the yen made strong gains against the AUD and NZD to key beneficiaries of Japan’s prolonged policy platform.Our attentions turn now to China PMI data, Euro area CPI data and US manufacturing data for direction into the weekly close.
Expected Ranges
- AUD/USD: 0.6440 - 0.6580 ▼
- AUD/EUR: 0.5980 - 0.6080 ▲
- GBP/AUD: 1.9250 - 1.9550 ▼
- AUD/NZD: 1.0650 - 1.0720 ▲
- AUD/CAD: 0.8750 - 0.8850 ▼