Home Daily Commentaries Aussie dollar breaks 0.74 U.S. cents on improved risk appetite

Aussie dollar breaks 0.74 U.S. cents on improved risk appetite

Daily Currency Update

The Australian dollar is slightly stronger this morning when compared to the greenback. On Friday the Aussie dollar traded a little over 0.74 U.S. cents as risk appetite helped propel the Aussie dollar to a fresh monthly high of 0.7414.  The Aussie dollar was up 0.5% on Friday (1.7% on the week) against the greenback. The global economy is facing an incredible amount of uncertainty at the moment which is continuing to drive the volatility we’re seeing in financial markets. Whether it’s uncertainty around inflation, interest rates, commodity prices, Covid or Ukraine, the growth outlook has become extremely unclear and is constantly subject to significant revisions.

Looking ahead this week and on Tuesday we will hear from the Reserve Bank of Australia (RBA) Governor Philip Lowe and if he hints that a change is coming, we could see a boost in the Aussie dollar.  On Thursday we will see the release of the Purchasing Managers' Index (PMI) a leading indicator of economic health which surveys around 400 purchasing managers which asks respondents to rate the relative level of business conditions including employment, production, new orders, prices, supplier deliveries, and inventories.  From a technical perspective, the AUD/USD pair is currently trading at 0.7387. We continue to expect support to hold on to moves approaching 0.7300 while now any upward push will likely meet resistance around 0.7440.

Key Movers

On Friday in the saw the release of US Jobless Claims. In the week ending March 12, the advance figure for seasonally adjusted initial claims was 214,000, a decrease of 15,000 from the previous week's revised level. The previous week's level was revised up by 2,000 from 227,000 to 229,000. The 4-week moving average was 223,000, a decrease of 8,750 from the previous week's revised average. The previous week's average was revised up by 500 from 231,250 to 231,750. Looking ahead this week and the economic calendar is filled with releases that include new home sales, durable goods orders, the flash PMI readings, and the final consumer sentiment readings for March.  Widespread pricing pressures will likely weigh on consumer sentiment, manufacturing and service activity. The housing market remains hot but surging mortgage rates will shortly cool that economy.

Last week the Federal Open Market Committee (FOMC) raised interest rates by 25bps for the first time since 2018 whilst signalling there could be more.  Over the weekend Federal Governor Christopher Waller put the market firmly on notice for a 50bps rate hike in the coming months, explaining it was only the uncertainty around the Ukraine war that persuaded him to vote for a 25bps hike last week.

Expected Ranges

  • AUD/USD: 0.7300 - 0.7500 ▲
  • AUD/EUR: 0.6600 - 0.6800 ▲
  • GBP/AUD: 1.7650 - 1.7850 ▼
  • AUD/NZD: 1.0550 - 1.0750 ▲
  • AUD/CAD: 0.9200 - 0.9400 ▲