Aussie dollar holds above US$0.64
Daily Currency Update
The Australian dollar is slightly stronger this morning when valued against the Greenback, trading below US$0.64. The AUD/USD pair strengthened on an upside break of the consolidation formed in a range of 0.6430-0.6450 in the European session. The Aussie asset picks strength as the US Dollar Index (DXY) eases ahead of the Federal Reserve (Fed) monetary policy, which will be announced on Wednesday. In addition the Australian dollar will remain in action amid the interest rate policy by the People’s Bank of China (PBoC), which will be revealed on Wednesday. A dovish interest rate stance is expected from the PBoC due to upside risks to deflation amid bleak household’ demand. The AUD/USD pair has rebounded after it found support on August 17 low around 0.6366. The AUD/USD is currently trading at 0.6454 at time of writing.Yesterday the Reserve Bank of Australia (RBA) new governor Michele Bullock released the Minutes from last month's meeting showing the board considered hiking the cash rate again, but it ultimately kept the official cash rate at 4.1 per cent. The Board minutes also pointed out higher oil prices were driving petrol prices up and that "some further tightening in policy may be required should inflation prove more persistent than expected". Looking ahead today on the local front and the Melbourne Institute will release the Indexes of Economic Activity. This index is designed to predict the direction of the economy, but it tends to have a muted impact because most of the indicators used in the calculation are released previously. Finally on Friday we will see the release of both Manufacturing and Services Purchasing Managers' Indexes (PMI).
Key Movers
U.S. homebuilding plunged to a more than three-year low in August as a resurgence in mortgage rates weighed on demand for housing, but a jump in permits suggested new construction remained supported by a dearth of homes on the market. The decline in housing starts reported by the Commerce Department on Tuesday was the largest in a year and occurred across the board. Housing starts tumbled 11.3% to a seasonally adjusted annual rate of 1.283 million units last month, the lowest level since June 2020. Data for July was revised lower to show starts accelerating to a rate of 1.447 million units instead of the previously reported 1.452 million units. Single-family housing starts, which account for the bulk of homebuilding, dropped 4.3% to a rate of 941,000 units last month. Single-family homebuilding dropped in the Northeast and Midwest and slumped 26.9% in the West, which was blamed on Hurricane Hilary. It rose in the densely populated South.Looking ahead today and all eyes will be on the Federal Reserve interest rate decision. The Federal Reserve is expected to hold its benchmark lending rate steady this week as it waits for more data to understand how previous rate hikes are affecting the US economy. The central bank raised rates to a 22-year high in July. At the conclusion of its two-day policy meeting on Wednesday, the Fed is also set to release a fresh set of economic projections that will likely reflect stronger economic growth and slightly lower unemployment this year, compared with previous estimates. Officials’ new economic projections will likely show at least one more rate hike this year. There seems to be a consensus among Fed officials that holding rates steady this month is the right move, but some have said the Fed could raise rates again after September.
Expected Ranges
- AUD/USD: 0.6350 - 0.6550 ▲
- AUD/EUR: 0.5950 - 0.6150 ▲
- GBP/AUD: 1.9100 - 1.9300 ▼
- AUD/NZD: 1.0770 - 1.0970 ▲
- AUD/CAD: 0.8580 - 0.8780 ▼