Home Daily Commentaries Aussie dollar holds above 69 US cents

Aussie dollar holds above 69 US cents

Monday 27 June, 2022

Daily Currency Update

The Australian dollar is stronger this this morning when valued against the Greenback trading just above US 0.69c. The AUD/USD pair broke above 0.6920 and jumped to 0.6957 on Friday, reaching the highest level in two days on the back of strong rally in equity markets.  The Australian dollar recovered from weekly lows under 0.6900, erasing weekly losses. Reserve Bank of Australia (RBA) Governor Philip Lowe said on Friday that he does not expect a recession in Australia but acknowledged that there is a narrow path back to low inflation.  To bring inflation to heel (currently 5.1 per cent and now likely on its way to 7 per cent by year’s end), the RBA is increasing interest rates. The RBA has already taken the cash rate from 0.1 per cent to 0.85 per cent at its past two meetings. When board members sit down on July 5 for their next meeting, they will debate whether to hike rates by either a quarter of a percentage point or a half.

Looking ahead this week and on Wednesday we will see the release of May’s retail sales numbers.  A strong retail beat will boost the case for another aggressive move by the RBA in July after their outsized 50bps hike. On a technical level this week the short-term outlook for the Australian dollar has improved. The next resistance level is at 0.6990. Whereas a decline back under 0.6925 would expose the weekly low around 0.6870.

Key Movers

Stocks racked up more gains on Wall Street Friday, as the S&P 500 had its best day in two years and just its second winning week in the last 12 to provide a bit of relief from the market’s brutal sell-off this year. The S&P500 surged over 3% on Friday, adding to gains seen earlier in the week. After falling as low as 3.00% late last week the US 10-year rate closed at 3.13%. On the data front last week we saw the release of the final University of Michigan survey and US new homes sales for the month of May which surprisingly surged by over 10%. However the market was more fixated on the inflation expectations section of the University of Michigan survey, which showed the final estimate revised down from 3.3% to 3.1% for the 5-10 years ahead measure.

Looking ahead this week In the US attention will likely continue to be on how the Federal Reserve evaluates the current outlook between high inflation and recession fears. Regarding data, the Personal Consumption Expenditures (PCE report) on Thursday will be the most important followed by the ISM Manufacturing on Friday which is a leading indicator of economic health.  On Wednesday Federal Reserve Chair Jerome Powell will speak as he attends the ECB Forum on Central Banking.

Expected Ranges

  • AUD/USD: 0.6850 - 0.7050 ▲
  • AUD/EUR: 0.6450 - 0.6650 ▲
  • GBP/AUD: 1.7550 - 1.7750 ▼
  • AUD/NZD: 1.0850 - 1.1050 ▲
  • AUD/CAD: 0.8850 - 0.9050 ▲