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AUD consolidates after sluggish start to 2020

AUD - Australian Dollar

The AUD edged marginally lower through trade on Monday slipping below 0.69 to touch intraday lows at 0.6895. Despite a broader uptick in risk sentiment the AUD struggled to mount any sustained upward momentum and remained largely range bound for much of the session. Having slipped 2% year to date and giving up approximately half of the gains enjoyed through December we expect a period of consolidation with support on moves approaching 0.6850 and 0.6820 as global uncertainties ease and the knee jerk reaction to the expected GDP impact of the devastating fire season abate.

With little to note on the domestic dockets our attentions this week turn to the signing of phase 1 in the US China trade deal, a significant marker and signal - when coupled with pending US currency report in which it is expected China will be removed as a currency manipulator - that tensions between the world’s economic superpowers have eased.

Key Movers

The USD edged upward through trade on Monday, recouping losses suffered in the wake of Friday’s disappointing labour market data and a decline in wage growth that fuelled expectations a Fed Rate cut will be proffered through the latter half of the year. Monday’s advances comes as investors prepare for a heavy week of domestic data points, headlined by CPI inflation data Tuesday and Core Retail Sales data Thursday. Softness across these data points will affirm suggestions the US economy is shifting nearer recession and subsequently increase the likelihood monetary policy amendments will be required at some point through 2020.

The Great British pound was the days worst performer Monday, falling half a percent and slipping further below 1.30 when valued against the USD. A raft of macroeconomic data sets showed the UK economy grew at its slowest pace in more than seven years and follows comments from the Bank of England that suggest a rate cut could be issued in the weeks ahead. As the likelihood of monetary policy corrections increases sterling will remain under pressure. Having already fallen 2% in the first two weeks of 2020 we will continue to monitor data points ahead of the January BoE meeting for any indication a rate hike is imminent.

Expected Ranges

AUD/USD: 0.6820 - 0.6950 ▼

AUD/EUR: 0.6130 - 0.6230 ▼

GBP/AUD: 1.8620 - 1.8990 ▼

AUD/NZD: 1.0370 - 1.0490 ▲

AUD/CAD: 0.8980 - 0.9050 ▼