Home Daily Commentaries Australian dollar retreats on Westpac rate cut forecasts

Australian dollar retreats on Westpac rate cut forecasts

Daily Currency Update

AUD - Australian DollarThe Australian Dollar subsided yesterday following guidance from Westpac that they are now pricing two interest rate cuts into February 2020. Opening the morning treading water above the 70 US cent support level, forecasts from Chief Economist Bill Evans of two cuts into February 2020 on waning inflation and unemployment saw a quick decline for the local currency. Overnight lows were seen 0.6972.The release of flash manufacturing and services PMI data on Wednesday morning did no favours for the local currency as both measures came in lower than the previous months reading.A quiet day on the domestic front for macro data as RBA Governor Lowe speaks today at a luncheon on “Inflation Targeting and Economic Welfare”. From a technical perspective, the AUD/USD pair is currently trading at 0.6977. We continue to expect support to hold on moves approaching 0.6925 while now any upward push will likely meet resistance at 0.7060.

Key Movers

The US Dollar was flat overnight as traders took a breather as they look to position themselves ahead of next weeks Federal Reserve interest rate decision. The US Dollar Index (DXY) was flat following its 1 cent rally this week as traders lowered their expectations that the FOMC would cut by 50 bps. Pulling off from highs overnight of 97.81 to 97.68 on open this morning, the greenback was hampered by a poor Flash Manufacturing PMI reading which expanded at its slowest pace in 10 years. Offsetting this release was growth in the service sector where the majority of Americans are employed. The Great British Pound was one of the better performers overnight against G10 currencies as Boris Johnson was elected as Tory leader and becoming third Prime Minister of the UK in three years. Hoping to restore confidence for the local economy and lead a path to a favourable Brexit decision, markets reacted positively to the news, rallying to overnight highs of 1.1220 against the Euro and 1.2520 against the Greenback.The Euro continued to see pressure ahead of this evenings ECB Policy meeting as speculation is rife that ECB President Mario Draghi will likely announce more aggressive policy stimulus to boost lagging inflation and growth forecasts. The EUR/USD cross has declined from July 19th highs of 1.1280 to open this morning at 1.1142.

Expected Ranges

  • AUD/USD: 0.6925 - 0.7020 ▼
  • GBP/AUD: 1.7700 - 1.8100 ▲
  • AUD/NZD: 1.0380 - 1.0460 ▼
  • AUD/EUR: 0.6200 - 0.6300 ▼
  • AUD/CAD: 0.9100 - 0.9200 ▼