AUD breaks US$0.66 and eyes new higher trading range
Daily Currency Update
The Australian dollar tested a new 3-month high through trade on Monday, poking its head above US$0.66, in what was otherwise a largely uneventful start to the week. In the absence of major newsflow and headline data markets looked to extend pre-Thanksgiving moves and the risk on shift. Equities edged higher and US treasuries fell across the yield curve forcing the USD lower across the board.Having touched intraday highs at US$0.6611, the AUD has since traded sideways bouncing between US$0.6590 and the new 12-week peak. The question now is, can the AUD extend gains and enjoy a meaningful break above US$0.66?
Our attention turns today to domestic retail sale data and commentary from RBA Governor Michelle Bullock. As economic momentum slows, activity data and monetary policy guidance will prove key in shaping near and medium-term AUD direction. Markets are still pricing in at least one more RBA rate hike through Q1 next year and with the Australian economy lagging, the rest of the world is feeling the initial impacts of inflation.
It is likely a paring in recent monetary policy tightening will also lag other major central banks, potentially opening the door for the AUD to enjoy a yield advantage through 2024.
Key Movers
The Japanese yen outperformed through trade on Monday, buoyed by a decline in US treasuries and a broader retreat in global rates. US treasuries are down 3-5 basis points across the curve as 2- and 10-year rates retrace gains won through September and October while European yields fell 10 points and UK gilts 7-basis points. The USD slipped back below 149, giving up nearly half a per cent to trade at 148.90. The euro and GBP are little changed trading at 1.0955 and 1.2630 respectively.Our attention turns now to US consumer confidence data and commentary from key FOMC members. With Fed policy expectations driving direction activity data and policymakers' underlying tone will prove key in shaping near-term direction. Markets remain incredibly sensitive to anything that could reshape the current policy narrative and an uptick in consumer sentiment followed by hawkish commentary could be enough to help spur USD demand and temper gains enjoyed by other majors through the last 2 weeks.
Expected Ranges
- AUD/USD: 0.6480 - 0.6620 ▲
- AUD/EUR: 0.5950 - 0.6050 ▲
- GBP/AUD: 1.8900 - 1.9200 ▼
- AUD/NZD: 1.0780 - 1.0880 ▼
- AUD/CAD: 0.8950 - 0.9050 ▲