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Aussie driven lower as China falters and US staves of growth concerns

AUD - Australian Dollar

The Australian dollar broke below 0.69 US cents Friday, maintaining a week long sell off to test 1-month lows near 0.6850. With little of note on the domestic docket, the AUD succumbed to broad based demand for the USD, as stronger than anticipated domestic data and increasing concern surrounding the impact of trade tensions on the Chinese economy weighed in investors’ appetite for risk. The worlds base currency found support after revisions to retail sales data suggest the pace of deceleration across the US economy may not be as rapid as first feared, allowing the Fed to measure the pace and timing of any future rate cut.

Having touched intraday lows at 0.6853, both domestic and global markers suggest there is more room to fall as demand for risk remains weak in the face of percolating trade tensions while soft domestic data points add mounting pressure on the RBA to cut rates again. With supports at 0.6850 holding for now, attentions turn to June’s RBA meeting minutes tomorrow and the Federal Reserves FOMC policy meeting Wednesday. Following Thursday uptick in unemployment markets will be keenly attuned to RBA rhetoric for clues as to when policy makers will cut again. While July looks unlikely there is mounting pressure the board to move in August with a 2nd cut fully priced in by October. A break below 0.6850 could prompt a deeper correction and force a move toward 0.67. In contrast an upbeat RBA and a dovish Fed could stave off AUD downside and foster a run back toward 0.70.

Key Movers

The US dollar rallied through trade on Friday, advancing to a 2-week high following moderate retail sales data. Consumer spending rose half a percent in May, largely meeting analyst expectations, while data for April was revised upward having originally shown a two tenths contraction. The upbeat read assuaged investor fears that the pace of economic growth is decelerating at an alarming rate, easing some of the pressure on the Federal Reserve to reverse its recent monetary policy tightening.

Sterling marked a sixth consecutive week of losses when valued against the Euro as pro-Brexit conservative Boris Johnson firms as the favourite to replace Theresa May as Prime Minister. Concerns Johnson will lead the UK out of Europe without a deal in place are weighing heavy on the Pound, forcing Cable nearer through 1.26 to 1.2571

Expected Ranges

AUD/USD: 0.6830 - 0.6980 ▼

AUD/EUR: 0.6080 - 0.6180 ▼

GBP/AUD: 1.8150 - 1.8350 ▼

AUD/NZD: 1.0520 - 1.0650 ▲

AUD/CAD: 0.9140 - 0.9280 ▲