Daily Currency Update

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AUD tests recent ranges following USD rebound

AUD - Australian Dollar

The Australian dollar drifted lower through trade on Wednesday, depressed by weakness across equities and a slew of stronger than anticipated US macroeconomic data sets. Having given up 0.78 US cents, the AUD remained largely range bound through the domestic session bouncing between 0.7740 and 0.7770 before marking fresh daily and weekly lows at 0.7725 following a massive upward surprise in US retail sales. Having disappointed in December, US consumers turned out in January marking a 5.1% uptick in spending; well above the 1% anticipated. The strong print was supported by gains in PPI inflation, industrial production and home sales which suggest the US economy is stronger than first anticipated. Having drifted back toward 0.7750 on open, our attentions now turn to domestic employment data. The monthly labour market report remains a crucial measure of recovery and a key marker for the RBA. Material improvements in job creation and a depreciation in unemployment would likely mean the RBA current QE program will not extend beyond September, while a poor print ahead of relaxed Jobseeker and JobKeeper benefits, next month may prompt calls for extend stimulus, weighing on the AUD. We anticipate an improvement and reduction to 6.4%.

Key Movers

The dollar index advanced through trade on Wednesday up 0.3% following higher bond rates and stronger than anticipated domestic retail sales. Following a soft showing in December, consumer spending rebounded strongly in January up 5.1% month on month, well beyond the 1.1% growth anticipated and raising some concerns inflation pressures may accelerate as fiscal stimulus is introduced to the economy. The dollar advanced against both the GBP and euro driving the index higher. Sterling drifted below 1.39 and touched 1.3830 before settling above 1.3850 into this morning’s open. The euro slipped below 1.21 forced to lows at 1.2030. Europe remains behind the US and UK when comparing vaccination schedules while the stronger US macroeconomic showing highlighted the divergence in economic performance and growth expectations. Attentions now turn to the FOMC minutes and US unemployment claims ahead of tomorrow’s slew of Manufacturing and Services data across Europe and the US as key markers of underlying fundamental health.

Expected Ranges

AUD/USD: 0.7680 - 0.7790 ▼

AUD/EUR: 0.6380 - 0.6470 ▲

GBP/AUD: 1.7780 - 1.7990 ▼

AUD/NZD: 1.0720 - 1.0820 ▲

AUD/CAD: 0.9790 - 0.9860 ▼