Home Daily Commentaries Aussie dollar trading just below 70 US cents

Aussie dollar trading just below 70 US cents

Thursday 28 July, 2022

Daily Currency Update

The Australian dollar is slightly stronger this morning trading just below 70 US cents. The AUD/USD pair advanced within range on Wednesday reaching an overnight high of US$0.7012. Yesterday inflation in Australia reached a level not seen in decades, recording the second highest quarterly increase since the introduction of the Goods and Services Tax (GST). New data from the Australian Bureau of Statistics (ABS) showed the Consumer Price Index – otherwise known as CPI – rose 6.1 per cent over the 12 months to the June 2022 quarter. On a quarterly basis, the CPI rose 1.8 per cent, the second highest three-month jump since the introduction of the GST. The last time annual inflation was at 6.1 per cent was in September 2000. Before that, the previous high was 6.9 per cent in December 1990. The biggest contributors to the spike were the prices of new homes which rose 5.6 per cent and petrol, which recorded a 4.2 per cent hike. Looking ahead today on the data front we will see the release of monthly Retail Sales figures which is the earliest look at vital consumer spending data. Then on Friday, we will see the release of the Producer Price Index (PPI) another leading indicator of consumer inflation.

Key Movers

Overnight the US Federal Reserve made history with a second 75 basis point rate hike in as many months. At the conclusion of its July monetary policymaking meeting, members of the US central bank on Wednesday once again approved an interest rate hike of three-quarters of a percentage point. Members voted unanimously in favour of the aggressive move to tackle rising inflation. The US Federal Reserve’s actions will increase the rate that banks charge each other for overnight borrowing to a range of between 2.25 per cent to 2.50 per cent, the highest since December 2018. The US Federal Reserve must execute a delicate balancing act or its strategy could slow economic growth while inflation is still growing. In the last 11 tightening cycles, the US Federal Reserve has only successfully avoided recession three times. During each of those cycles, inflation was lower than it is today. That has made some analysts and market participants nervous.

Expected Ranges

  • AUD/USD: 0.6900 - 0.7100 ▲
  • AUD/EUR: 0.6750 - 0.6950 ▲
  • GBP/AUD: 1.7250 - 1.7450 ▲
  • AUD/NZD: 1.1050 - 1.1250 ▲
  • AUD/CAD: 0.8850 - 0.9050 ▲