Daily Currency Update

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RBA back in the headlines with expectations of further cuts

AUD - Australian Dollar

The Australian dollar continues to weaken on the back of global growth concerns and expectations of deeper rate cuts from the RBA. The AUD/USD shed an immediate 20-points from 0.6980 to 0.6960 following a speech delivered by the RBA Governor Philip Lowe at a luncheon yesterday in Sydney. Lowe said that the RBA is prepared to ease policy further if required, “If demand growth is not sufficient, the board is prepared to provide additional support by easing monetary policy further”. With underlying inflation still under the RBA’s 2-3% target it will be sometime before the RBA would even think about raising rates. Markets are now pricing in two more cuts around November and February.

Looking ahead, it is a quiet day locally with no scheduled releases, markets will be watching the North American markets for the release of US GDP figures which plays a crucial role for the US Federal Reserve as it looks to potentially cut rates. From a technical perspective, the AUD/USD pair is currently trading at 0.6953 and we expect to see immediate support at 0.6940, a sustained move under this could lead to 0.6900. On the flip side, resistance is seen at 0.6980 followed by 0.7000.

Key Movers

The European central bank met last night and said it expects its key interest rates to remain “at their present lower levels” at least through the first half of 2020. Draghi added there were additional measures to stimulate the euro zone economy. The EUR/USD briefly hit a two-year low 1.1101 following this however, Draghi also told reporters that the risk of a recession in the region was low giving a more mixed message and sending the pair higher to 1.1153.

US Durable Goods orders and shipments beat market estimates and rose 2% for the month of June being its strongest number since last summer. The rebound in durable goods orders received a boost from a turnaround in orders for transportation equipment, which surged up by 3.8 percent in June after tumbling by 7.5 percent in May. Orders for non-defence aircraft and parts soared by 75.5 percent in June after plummeting by 52.2 percent in May, while orders for motor vehicles and parts also showed a significant increase.

Expected Ranges

AUD/USD: 0.6900 - 0.7000 ▼

GBP/AUD: 1.7700 - 1.8000 ▲

AUD/NZD: 1.0380 - 1.0460 ▲

AUD/EUR: 0.6200 - 0.6280 ▼

AUD/CAD: 0.9100 - 0.9180 ▼