Home Daily Commentaries Aussie dollar trades below 67 US cents

Aussie dollar trades below 67 US cents

Daily Currency Update

The Australian dollar is slightly weaker this morning when valued against the Greenback currently trading below 67 US cents at the time of writing. The AUD/USD pair has stretched its downside below the immediate support of 0.6750 on Friday. Weakness in the Aussie dollar is backed by overall strength in the US Dollar and tight labor market conditions which are confirming the resumption of the policy-tightening spell by the Reserve Bank of Australia (RBA). Employment additions in June were recorded at 32.6K while investors estimated fresh addition of 15K. The Unemployment Rate remained steady at 3.5% vs. expectations of 3.6%. Investors should note that RBA skipped hiking interest rates in June and kept the Official Cash Rate (OCR) at 4.10%.
On the local data front this week all eyes will be on the Australian Bureau of Statistics which will release its latest quarterly and monthly consumer price index data on Wednesday, a little under a week out from the next RBA board meeting. Economists expect the annual growth rate of headline CPI will ease from seven per cent to 6.2 per cent in the June quarter. The RBA board will also be closely watching the annual underlying CPI, which is expected to dip from 6.6 per cent to 6.1 per cent. The monthly CPI indicator is predicted to ease from 5.6 per cent in May to 5.4 per cent in June. But strong employment numbers released last week will weigh heavily on the central bank's thinking. Consumer prices account for a majority of overall inflation. Inflation is important to currency valuation because rising prices lead the central bank to raise interest rates out of respect for their inflation containment mandate. On Thursday we will see the release of Monthly retail sales figures the primary gauge of consumer spending, which accounts for the majority of overall economic activity.

Key Movers

In the US on Friday Wall Street closed out another winning week with a quiet Friday, as stocks found some stability after sliding the day before. The S&P 500 edged up less than 0.1 per cent to cap its eighth winning week in the last 10. The Dow Jones added less than 0.1 per cent, its 10th gain in a row. The Nasdaq composite slipped by 0.2 per cent a day after tumbling to its worst loss in more than four months. The stock market has generally been on a tear this year as the economy has defied predictions of a recession. It’s so far powered through much higher interest rates meant to bring down inflation, and the hope is that it may outlast the Federal Reserve’s rate-hike campaign. The Fed is widely expected to raise its federal funds rate on Wednesday to its highest level since 2001.
Last week Japan’s core consumer price index climbed 3.3% year-on-year in June, in line with expectations of economists polled by Reuters and slightly higher than the 3.2% recorded in May. Analysts are split over the Bank of Japan’s moves after the country’s core inflation came in above the central bank’s target of 2% for the 15th straight month. The inflation numbers are key to the BOJ’s monetary policy considerations, ahead of its meeting on Friday. The central bank is expected to leave its policy settings unchanged with officials pushing back against any near-term adjustment to its yield curve control program.

Expected Ranges

  • AUD/USD: 0.6600 - 0.6800 ▼
  • AUD/EUR: 0.5900 - 0.6100 ▼
  • GBP/AUD: 1.8950 - 1.9150 ▲
  • AUD/NZD: 1.0750 - 1.0950 ▲
  • AUD/CAD: 0.8800 - 0.9000 ▼