Home Daily Commentaries AUD tracks sideways ahead of key RBA and Bank of Japan policy updates

AUD tracks sideways ahead of key RBA and Bank of Japan policy updates

Daily Currency Update

It was a relatively subdued start to the week with the AUD maintaining a narrow range as investors patiently await a slew of key central bank policy updates. With little data of note on the docket, yield rates and currencies were little moved as expectations for Fed and RBA policy were largely unchanged leading into this week’s meetings. The AUD bounced between US$0.6550 and US$0.6575.

We expect the RBA will hold rates and while there is no new forecast issued the following press conference will prove key to shaping near-term expectations. There are growing calls for the RBA to cut rates as early as August, yet with little new evidence emerging since the February outlook, we expect policymakers will push the same message and hang on to a tightening bias for now. A shift in guidance could hurt the AUD and prompt a drive below supports at US$0.65.

Key Movers

There was little movement among majors through trade on Monday with the USD DXY index edging marginally higher, up 0.1%, as investors prepare for key central bank policy updates. Ahead of the FOMC policy meeting, there are 15-basis points of cuts priced in for June and just over 70 points priced for the year's end.

Market pricing has now fallen below the Fed’s December dot plot following a string of hotter-than-expected inflation markers. Investors will be keenly attuned to any commentary that suggests a policy change is nigh.

Ahead of the Bank of Japan (BoJ) meeting today, reports emerged that the BoJ is poised to end its yield curve controls and call an end to negative interest rates. Such a move has been much anticipated and pricing has firmed in recent weeks, so it will be interesting to see the scale and scope of the market reaction should the BoJ follow through.

The yen was flat against the USD on Monday bouncing between 148.9 and 149.3, while the GBP was little changed and the euro gave up 0.2% trading down to 1.0870. Attentions are squarely affixed on the RBA and Bank of Japan for direction ahead of the FOMC meeting later in the week.

Expected Ranges

  • AUD/USD: 0.6500 - 0.6600 ▼
  • AUD/EUR: 0.6580 - 0.6700 ▲
  • GBP/AUD: 1.9300 - 1.9500 ▼
  • AUD/NZD: 1.0680 - 1.0820 ▲
  • AUD/CAD: 0.8820 - 0.8930 ▼

Written by

Matt Richardson

OFXpert

As a Senior Corporate Client Manager, Matt provides expertise in currency risk management to his clients, drawing from his 14 years of experience in foreign exchange. Matt has clients who he has been working with for over a decade, a testament to his knowledge and dedication in the field. Matt is also a regular contributor on Ausbiz, offering clear and precise updates on currency market trends, showcasing his ability to interpret complex financial data into actionable insights.