AUD maintains narrow range as robust US data offsets CNY rebound
Daily Currency Update
The Australian dollar maintained a relatively narrow range on Tuesday, bouncing between US$0.6670 and US$0.6720. With little of note on the domestic docket the AUD turned to China and the daily fixing of the Chinese yuan as a key marker of CNY fortunes. The Peoples Bank of China (PBOC) set the daily fixing higher than anticipated for the second day running, a clear signal policy makers are becoming uncomfortable with the yuan’s rapid depreciation. The stronger fix helped contribute to a sharp move lower in USD/CNH, while comments from Premier Li Qiang that China will implement measures to expand domestic demand and meets its growth targets helped bolster risk sentiment. The AUD bounced off intraday lows at US$0.6670, climbing back through US$0.67 to mark intraday highs at US$0.6720. Unfortunately, the AUD couldn’t maintain momentum through the overnight session, retreating back below US$0.67 amid stronger than anticipated US durable goods data and new home sales. Orders rose at a faster rate than anticipated and printed well ahead of leading indicators, while new home sales jumped to their strongest level in 16 months. The stronger data set implies there is ample scope for the Fed to continue lifting rates and US treasury yields responded in kind, dragging the USD higher and forcing the AUD back toward US$0.6685 on open this morning.Our attentions turn now to CPI data for May and commentary from the ECB Sintra conference where ECB president Lagarde, Fed President Powell, Bank of England Governor Bailey, and Bank of Japan Governor Ueda are all set to hit the wires.
Key Movers
There is ample to digest this morning as the USD outpaced risk assets and the JPY, while the GBP and euro crept higher. The USD has extended its upward run against the Japanese yen, marking fresh multi-month highs above 1.44 following stronger than anticipated US Durable goods orders and robust new home sales. Hotter than anticipated data helped reverse an early downturn in 2- and 10-year yields, dragging the USD upward and putting downward pressure on the yen amid a higher rates backdrop. With BoJ and Ministry of Finance officials already issuing clear warnings the recent yen slide has been too one sided, we’d expect intervention in some form or another should the yen continue toward 145 and 146.The euro found support in commentary from ECB officials. President Lagarde presented a hawkish view when speaking at the ECB Sintra conference on Monetary Policy. Lagarde suggested the ECB is set to hike rates again in July and will be unlikely to be able to declare an end to tightening “any time soon”. The comments highlighted the banks firm desire to put further downward pressure on inflation, with growth concerns taking a back seat to fears of systemic and entrenched inflation. Lagarde was also at pains to point out the market should not expect a rapid reversal in policy if, and when, inflation moves back to target, an indication the ECB may intend to hold policy rates at elevated levels for longer. The promise of tighter monetary policy over a longer period helped drive euro gains, propelling the single currency through 1.0950 toward intraday highs above 1.0970.
Our attentions turn now to the ECB Sintra conference where ECB president Lagarde, Fed President Powell, Bank of England Governor Bailey, and Bank of Japan Governor Ueda are all set to hit the wires.
Expected Ranges
- AUD/USD: 0.6620 - 0.6820 ▼
- AUD/EUR: 0.6050 - 0.6150 ▼
- GBP/AUD: 1.8820 - 1.9220 ▲
- AUD/NZD: 1.0780 - 1.0920 ▲
- AUD/CAD: 0.8750 - 0.8850 ▲