AUD remains range bound despite a week of central bank surprises
Friday 5 May, 2023
Daily Currency UpdateThe Australian dollar crept upward through trade on Thursday, making another attempt to break above US$0.67. Having opened the day below US$0.6650 the AUD climbed steadily through the domestic session marking intraday highs just above US$0.6690, however failed to extend on gain overnight. Selling pressures overcame the AUD early forcing a move back toward US$0.6660 before another upswing saw it poke its head above US$0.67 and settle marginally below resistance at US$0.6693 leading into this morning’s open. The AUD remains well and truly range bound, with the weeks key central bank policy updates affording little change to the near-term outlook. Despite the RBA’s surprise rate hike and hints at a pause in Fed policy the AUD remains stuck between US$0.6580 and US$0.6730 as key market drivers continue to play off each other. US banking uncertainty and sustained global inflationary pressures continue to weigh on risk demand, while growing calls for the Fed to end its tightening cycle are beginning to weigh on the USD. Until we see a firm shift in narrative, we anticipate the AUD will continue to track within its current bounds.
Our attentions turn now to US non-farm payroll numbers for direction into the weekly close.
Key MoversThe euro was the worst performing major through trade on Thursday, giving up over half a percent as European rates fell following the ECB’s neutral policy update. Despite raising rates by 25 basis points and affording clear indications there was more ground to cover the ECB failed to meet the market's hawkish expectations, with many anticipating a 50-point rate adjustment and a promise of sustained aggression through the near term. The euro tumbled through 1.10 before finding support, edging higher to buy 1.1011 on open this morning.
Global rates faced added pressure as calls for the Fed to end its tightening cycle grow following reports of three new US bank causalities. PacWest Bank, Western Alliance and First Horizon are all expected to default in the coming days, raising concerns the Fed has tightened too much too quickly. Just hours after the Fed hinted at a pause to the current tightening cycle there is a growing chorus for policy makers to delay future rate hikes and avoid the collapse of the US’s small banking market. With US treasury yields tracking lower and global rates on the back foot, the Japanese yen found support. The USD touched intraday lows below 133.50 before pulling back above 134 and seems to have given up near-term hopes of a push back toward 140.
Our attentions today turn to US non-farm payroll data. We expect a further moderation in jobs growth and a small uptick in the unemployment rate. With labour market performance a key driver behind Fed policy a print outside consensus expectations could spark volatility into the weekly close.
- AUD/USD: 0.6580 - 0.6730 ▲
- AUD/EUR: 0.5980 - 0.6120 ▲
- GBP/AUD: 1.8680 - 1.9020 ▼
- AUD/NZD: 1.0580 - 1.0720 ▼
- AUD/CAD: 0.8980 - 0.9120 ▲