AUD steady in face of stronger USD
Daily Currency Update
The Australian dollar largely kept pace with the USD through trade on Tuesday, drifting marginally lower, but holding above US$0.68. A mixed US data set headlined by retail sales ensured Treasury yields would trade flat on the day and while the USD enjoyed modest gains across the board it appears markets were reluctant in extending the rebound. Having tracked between US$0.6790 and US$0.6835 the AUD opens this morning at US$0.6815 as our attentions turn to NZ and UK CPI reports and US housing data ahead of tomorrow's all-important local labour market update. Employment growth and unemployment have proved remarkably resilient in the face of rising costs and higher interest rates. Another uptick in employment growth coupled with unemployment remaining steady at 3.6% could fuel calls for the RBA to raise rates again in August. As the board works to control stubbornly sticky inflation pressures a robust employment market will give them confidence and scope in lifting rates. New RBA Governor Michelle Bullock has suggested unemployment needs to be nearer 4.5% if the economy is to operate at full capacity and we are keenly attuned to any change in rhetoric that may come under her leadership.Key Movers
The NZD has been the big mover on the day while the USD is broadly stronger retracing some of last week's downturn and pushing back against the euro, GBP and JPY. All are modestly weaker and the DXY Index is up 0.1%. US retail sales were mixed for June as the headline figure printed softer than anticipated yet on closer inspection so an upward revision in historical prints and a stronger rise in core sales, a better marker of ongoing GDP performance. In short, the data pointed to a 1% rise in consumer spending through the quarter, well down on the 4% surge enjoyed in Q1 but still expansionary. The print has cemented expectations for a 25-point rate hike next week.European rates and the euro fell after a dovish statement from European Central Bank (ECB) member Knot. Knot, typically one of the more hawkish ECB policy makers pushed back on calls for rate increases beyond July. He acknowledged a July increase was a necessity but as for anything beyond July he noted, "it would at most be a possibility but by no means a certainty". Having tracked toward US$1.1270 the euro then shifted back below US$1.1250 touching session lows at US$1.1210 before finding support.
Our attentions turn now to UK CPI data. We expect to see headline inflation fall to 8.2%, still well too high for the Bank of England.
Expected Ranges
- AUD/USD: 0.6750 - 0.6880 ▲
- AUD/EUR: 0.6030 - 0.6130 ▼
- GBP/AUD: 1.8920 - 1.9420 ▼
- AUD/NZD: 1.0750 - 1.0920 ▲
- AUD/CAD: 0.8920 - 0.9020 ▼