AUD wobbles in face of USD strength and China woes
Daily Currency Update
The Australian dollar slipped through trade on Thursday unable to hold above US$0.65 amidst a stronger USD and spillover effects from a weaker Chinese yuan. Another set of lackluster China economic news dampened demand for the CNY and CNH and weighed on the AUD as China worries continue. CPI inflation data showed deflationary pressures worsened in January, down from -0.3% year on year in December to -0.8%. A sharp decline in food prices, tourism and transportation led the decline and while the PBOC acknowledged the economy was working through a critical period of economic transitions, they appeared content in allowing prices to normalise naturally noting, "Supply and Demand is expected to improve ensuring there are no long-term basis for deflation”. The AUD slipped to intraday lows just above US$0.6480 and opens this morning at US$0.6491.Our attentions turn to RBA Governor Bullock as she fronts a parliamentary hearing on monetary policy, while German CPI inflation numbers and US seasonal inflation adjustments dominate the offshore ticket. We expect the AUD will face sustained near-term pressure and continue to track within the newly form lower range.
Key Movers
The USD has bucked the trend of the last few days and crept higher on indexed terms, with the DXY up 0.1% through trade on Thursday. A steady uptick in US treasury yields followed comments from Fed member Barkin, who added to recent Fed commentary suggesting a patient approach is best and that there is no rush to cut rates and risk inflation emerging again. The comments, coupled with a stronger than expected jobless claims report, helped lift the USD. With yields rising, the JPY was a notable underperformer, dampened by dovish comments from BoJ officials. The euro is little changed as ECB speakers pushed back on market calls for an April rate cut, suggesting policy makers need more time and assurances inflation will not return and is indeed headed toward target before rates can be adjusted. Yields and the expected trajectory of monetary policy continues to dominate direction and we look today to German and US inflation data adjustments for guidance into the weekly close.Expected Ranges
- AUD/USD: 0.6450 - 0.6550 ▼
- AUD/EUR: 0.5980 - 0.6080 ▼
- GBP/AUD: 1.9300 - 1.9500 ▲
- AUD/NZD: 1.0600 - 1.0700 ▼
- AUD/CAD: 0.8680 - 0.8780 ▼