Daily Currency Update

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Aussie fails to ride increased price pressures higher

AUD - Australian Dollar

The Australian dollar remained largely range bound through trade on Wednesday, struggling to mount any significant upside momentum despite an uptick in consumer price pressures. December’s CPI inflation report showed a small annual uptick in the costs of both broad based and core consumer products, jumping 1.8% and 1.6% respectively. While inflation still remains below the RBA’s 2%-3% target the small uptick in prices eases the pressure on the Central Banks policy setters to cut rates next month. When coupled with last week’s stronger than anticipated labour market and employment data the RBA now has some scope to push back interest rate adjustments and avoid additional monetary policy stimulus measures through the short term.

Attentions now shift back to the coronavirus and the broader implications for risk and economic demand. While short term fears still in play and the true nature of the virus still widely unknown we anticipate markets response will fluctuate as headline news filters through. With the AUD still supported on moves approaching 0.6750 we are watching a break below this handle as a possible marker and catalyst fostering a move toward 0.6680.

Key Movers

The Federal Reserve held interest rates on hold through Wednesday, highlighting sustained moderate economic growth and strength across the job’s/labour market as the drivers behind the unanimous policy decision. The statement was little changed from that issued after the December policy meeting and was widely expected across the broader market prompting little change across broader currency markets.

The Great British Pound remains poised near one-week lows ahead of the Bank of England’s policy decision. Despite a correction in rate cut expectations throughout the last week today’s rate announcement should inject some volatility into Sterling and a break outside recent ranges between 1.2950 and 1.3150. Currently markets are split with 50% of analyst pricing in no change while the other side have prepared for a cut. While recent macroeconomic indicators have shown some improvement there is certainly scope to support a interest rate adjustment, however with Britain’s divorce from the EU due to be finalised on Friday the Bank of England may want to leave some ammunition in the holster to combat any unknown economic fallout.

Expected Ranges

AUD/USD: 0.6680 - 0.6830 ▼

AUD/EUR: 0.6080 - 0.6180 ▼

GBP/AUD: 1.9080 - 1.9450 ▲

AUD/NZD: 1.0320 - 1.0380 ▼

AUD/CAD: 0.8850 - 0.8930 ▲