Home Daily Commentaries Aussie dollar trades above US$0.63

Aussie dollar trades above US$0.63

Monday 31 October, 2022

Daily Currency Update

The Aussie dollar is weaker this morning when valued against the US dollar. The Australian dollar attempted to regain the US$0.6400 area on Friday’s afternoon US session. However, the AUD/USD pair found support at US$0.6390 after depreciating from the US$0.6520 high on Thursday. Last week, the Australian dollar was boosted based on a weaker US dollar and a stronger-than-expected local CPI reading. The US dollar has seen some weakness due to the market looking for an end to the ever-hawkish Federal Reserve. On Friday’s local data front, the Australian Bureau of Statistics released the Producer Price Index (PPI), which saw demand (excluding exports) rise 1.9% this quarter, and 6.4% over the past twelve months. On the data front, today we will see the release of monthly retail sales figures, which is the earliest look at vital consumer spending data and the primary gauge of consumer spending, which accounts for the majority of overall economic activity. On Tuesday, all eyes will be on the Reserve Bank of Australia (RBA) interest rate announcement, which is expected to lift the official cash rate by another 0.25% from 2.60% to 2.85%. Later that evening, RBA Governor Philip Lowe is due to speak at the RBA Board Dinner in Hobart. Volatility is often experienced during his speeches as traders attempt to decipher interest rate clues. On Wednesday, we will see the release of monthly Building Approvals. On Thursday, we will see the release of Trade Balance figures.

Key Movers

All eyes this week will be on the Federal Open Market Committee (FOMC) meeting. Market expectations are firmly behind a fourth consecutive 75 basis points interest rate hike from the Federal Reserve. The key story is whether the Fed opens the door to a slower pace thereafter or if the hawks’ focus on core inflation momentum signals a fifth 75 basis points move in December. After all, core inflation readings are heading higher rather than lower; the US economy has returned to growth after two consecutive quarters of falling GDP. Job creation continues apace, with job vacancies exceeding the number of unemployed Americans by four million. The Fed continues to believe inflation risks are “weighted to the upside”, that ongoing rate hikes are “appropriate”, and that a “sustained period of below trend growth” is required to get inflation under control. Unsurprisingly, 75 basis points is fully priced by financial markets. Fed chair Jerome Powell has repeatedly admitted monetary policy works with “long and varied lags”, and after having hiked rates 375 basis points, it might soon be time to stop battering the economy so aggressively.

Expected Ranges

  • AUD/USD: 0.6300 - 0.6500 ▼
  • AUD/EUR: 0.6300 - 0.6500 ▼
  • GBP/AUD: 1.7850 - 1.8050 ▲
  • AUD/NZD: 1.0900 - 1.1100 ▲
  • AUD/CAD: 0.8600 - 0.8800 ▼