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AUD slides following dovish RBA commentary
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Daily Currency Update
The Australian dollar underwhelmed through trade on Tuesday, tracking lower against the USD amid a correction in domestic yields following a somewhat dovish RBA policy update. As anticipated the RBA left rates unchanged at 4.35%, however surprised markets by adopting a less than hawkish tone. Following stronger than anticipated Q1 inflation data markets had expected policy makers may adopt a bias toward one final rate hike. Instead, Governor Bullock noted that the board believes rates are at “the right level”. While she acknowledged a discussion over lifting rates was conducted the board decided the current policy platform was restrictive enough. Q2 inflation data will prove key in shaping near-term direction and rate expectations. Having traded near US$0.6630 leading into the policy announcement the AUD slipped back below US$0.66 and bought US$0.6598 on opening this morning. With little of note on the macro docket today our attentions remain with broader risk trends for direction through trade on Wednesday.Key Movers
The US dollar outperformed through trade on Tuesday recovering losses suffered in the wake of the Federal Open Market Committee policy update and softer than anticipated Non-farm payroll print. The DXY dollar index jumped 0.4% on the day led by gains against the yen. Having forced the USD back below ¥152 on Friday last week the yen has been unable to maintain any momentum and now trades just below ¥155 at ¥154.70. After two rounds of Ministry of Finance intervention last week markets are now questioning whether officials can maintain yen support. With gains driven by a backdrop of higher yields and divergent central bank policies, the yen is fundamentally weak, yet markets remain jittery given the prospect of intervention and we are closely monitoring any outsized moves. With the GBP underperforming and the euro trading flat, our attention now turns to Thursday’s Bank of England policy update. We expect rates will be left on hold at 5.25% and are instead keenly focused on the commentary surrounding the meeting for any clues as to the timing and trajectory of future rate movements.Expected Ranges
- AUD/USD: 0.6550 – 0.6650 ▼
- AUD/EUR: 0.6050 – 0.6180 ▼
- GBP/AUD: 1.8800 – 1.9100 ▼
- AUD/NZD: 1.0950 – 1.1050 ▼
- AUD/CAD: 0.9000 – 0.9100 ▼
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