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The AUD continues to creep higher, edging closer to 0.7750

AUD - Australian Dollar

The Australian dollar edged marginally higher through trade on Wednesday creeping nearer towards 0.7750 supported by a softer USD and dip in treasury yields. Having touched intraday lows at 0.7670 toward the end of the domestic trading session, the AUD trended higher overnight buoyed by a modest decline in US treasury yields and a softer than anticipated US CPI print. Topside gains were capped as domestic rates shifted lower amid comments from RBA governor Philip Lowe. Lowe, affirmed the bank's commitment to accommodative monetary policy doubling down on his dovish missive. Having touched highs at 0.7740 the AUD opens marginally lower buying 0.7735 US cents.

The Australian dollar remains vulnerable to swings in the current risk narrative with bond prices and treasury yields still steering direction. Having bounced off supports at 0.7620, we expect the AUD will maintain a narrow range throughout the day with resistance on moves extending to 0.7750 and beyond.

Key Movers

The US dollar fell through trade on Wednesday amid a weaker than expected CPI print and a decline in 2-, 5- and 10-year treasury yields. Month-on-month inflation fell short of expectations in February marking a third consecutive monthly miss; easing concerns that fiscal stimulus and a speedy rebound will create untenable inflationary pressure. That said, the heightened COVID-19 concerns and regional lockdowns still plague the recovery and a true signal of price performance most likely won’t be seen until April or May.

The euro extended beyond 1.19 to touch intraday highs at 1.1925, while the GBP touched highs at 1.3930 and the JPY forced the dollar off highs nearing 109. Our attentions now turn to the ECB’s monthly policy meeting. We expect no change from the recent communique, although we are keeping a close eye on commentary surrounding the recent pace of bond purchases. The ECB has slowed the pace of bond purchases recently despite upward pressure on prices. Investors will be keenly attuned to commentary from President Lagarde as she explains the bank's rationale behind recent action. Her response could prompt euro volatility.

Expected Ranges

AUD/USD: 0.7620 - 0.7780 ▲

AUD/EUR: 0.6390 - 0.6530 ▲

GBP/AUD: 1.7880 - 1.8120 ▼

AUD/NZD: 1.0720 - 1.0790 ▲

AUD/CAD: 0.9690 - 0.9820 ▲