Home Daily Commentaries Aussie dollar rallies above 67 US cents

Aussie dollar rallies above 67 US cents

Daily Currency Update

The Aussie dollar is stronger this morning when valued against the Greenback. The Australian Dollar continued its rally for the second consecutive day on Friday, the highest level since September 21, buoyed by a weak US dollar on the back of increasing hopes that the US Federal Reserve will start to relax its monetary tightening path over the coming months. Adding to this, the risk-on mood is seen as another factor undermining the safe-haven buck and further benefiting the risk-sensitive Aussie. The ultra-aggressive rate hikes by the Federal Reserve so far this year might be bearing fruit for the central bank in its fight against inflation. The consequence is that the market now has hopes that the tight monetary policy in the US may not crush the economy while reining in price pressures. The deceleration in US inflation is in contrast to the latest CPI data in Australia, where an acceleration has been noted. Conversely, the RBA’s slower pace of rate hikes as compared to the Federal Reserve has raised speculation that the cash rate in Australia may end up being higher and remain there for a longer period. Looking at the week ahead, both Australia and the US will see retail sales numbers and the US will also get PPI data. A strong PPI read could challenge the notion of a Fed pivot. The AUD/USD pair is currently trading at 0.6695 at the time of writing.

Key Movers

The downside surprise to US Consumer Price Index on Thursday night continues to reverberate around markets. US equities continued to power higher, the S&P500 up 0.9% on Friday, the USD slumped further, and commodities rallied strongly. Investors’ appetite for risk surged on Thursday following the release of cooler-than-expected US Consumer Prices Index data. Yearly inflation slowed down to 7.7% in October from 8.2% in the previous month, beating expectations of an 8% reading. These figures suggest that inflationary pressures might have peaked and provided some leeway to the US central bank to ease its monetary tightening cycle over the next months. Looking ahead today in the United States and the economic calendar is rather thin today with the only relevant indicator being the Preliminary Michigan Sentiment Index, which has eased beyond expectations, 54.7 from 59.9 in October while the consensus anticipated a softer decline to 59.5.
It was also announced that China is relaxing some of its strict COVID-19 restrictions and cutting quarantine periods has eased concerns about the potential impact on the global economy of a new set of lockdowns which has boosted investor sentiment further. New guidance released by the Chinese authorities on Friday confirmed that international visitors and close contacts would now need to spend 5 days in a quarantine facility and 3 days at home (down from the current 10-day requirement) while airlines would no longer be penalised for bringing Covid-positive passengers to the country, as foreshadowed by media reports last week. An eventual shift away from the Covid-zero policy would remove a major headwind to global growth.

Expected Ranges

  • AUD/USD: 0.6600 - 0.6800 ▲
  • AUD/EUR: 0.6350 - 0.6550 ▲
  • GBP/AUD: 1.7450 - 1.7650 ▲
  • AUD/NZD: 1.0800 - 1.1000 ▲
  • AUD/CAD: 0.8750 - 0.8950 ▲