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Aussie range bound; investors reluctant to extend upside momentum
AUD - Australian Dollar
Having rallied into last weeks close and flirting with an extension beyond 0.70 the AUD remained largely range bound through trade on Tuesday. Bouncing between 0.6948 and 0.6966 the AUD struggled to gather any real momentum despite a sharp rise in business confidence. While the NAB’s business confidence report purported a steep increase in corporate optimism, business conditions deteriorated as broader optics depict an economy losing momentum.
Investors appear reluctant in extending AUD upside as Global Growth concerns, ongoing trade tensions and fragile domestic economic conditions plague the domestic unit. With the market pricing in further RBA rate cuts attentions turn to Thursday labour market data. Lacklustre employment growth and a rise in unemployment will place mounting pressure on the RBA to back end this month’s rate cut with a second in July. Swaps pricing is showing an increased expectation the board will loosen policy rates again before October weighing on the AUD and limiting upward momentum.
Key Movers
The dollar edged lower through trade on Tuesday when measured against a basket of counterparts as attentions turned from trade with Mexico to Trade with China and the ongoing hostilities between the two superpower economies. Economic data signals have showed signs the trade war is beginning to weigh on US domestic growth, amplifying calls for the Federal Reserve to cut interest rates after a sustained period of tightening.
Tuesday saw a tepid increase in produce prices suggesting todays CPI print will provide little in the weigh of upward price momentum. A soft inflation read followed by a slow down in domestic retail sales on Friday would add further evidence that tariffs are slowing the economy and in this low inflation environment stagnating growth becomes all the more critical in front running monetary policy change. With swap pricing and forward points moving against the USD the tide of upward momentum for the worlds base currency may be turning.
Attentions today remain affixed to US CPI and commentary for ECB president Draghi. Any clues the ECB are willing to ease policy further will weigh on the combined unit.
Expected Ranges
AUD/USD: 0.6880 - 0.7020 ▼
AUD/EUR: 0.6080 - 0.6180 ▼
AUD/NZD: 1.0520 - 1.0620 ▲
AUD/CAD: 0.9210 - 0.9280 ▲
AUD/GBP: 0.5440 - 0.5520 ▲