Aussie dollar trades below 67 US cents
Monday 3 April, 2023
Daily Currency UpdateThe Australian dollar is weaker this morning when valued against the Greenback and closed the week at 0.6645. The Australian Dollar (AUD) retraces after hitting a weekly high of 0.6738, spurred on the American Dollar (USD) recovery as it got bolstered by weekly, monthly, and quarter-end flows. This week all eyes will be on Tuesday’s Reserve Bank of Australia (RBA) interest rate decision. Australia's central bank is expected to go for a final 25 basis point interest rate hike to 3.85% on Tuesday, although forecasts from economists suggest the decision on whether to hike or hold rates is on a knife edge. While inflation in Australia rose to a more than three-decade high of 7.8% last quarter, well above the central bank's target of 2%-3%, the bank signaled again this month a possible end to its current tightening cycle, as it did in December. A new monthly measure of Australian consumer prices on Wednesday showed inflation slowed to an eight-month low of 6.8% in February from 7.4% the previous month, bolstering the case for a pause in rate hikes. While the Reserve Bank of Australia (RBA) focuses on the more detailed quarterly inflation data, due on April 26, the slowing monthly inflation numbers suggest the peak may already be in the rear-view mirror.
In other economic news on Monday, the Australian Bureau of Statistics will release the monthly Building Approvals and Retail Sales figures which is the primary gauge of consumer spending, which accounts for the majority of overall economic activity. On Wednesday RBA Governor Philip Lowe is due to speak at the National Press Club, in Sydney. Traders scrutinize his public engagements as they are often used to drop subtle clues regarding future monetary policy. Finally, on Thursday we will see the release of the Trade balance data for the month.
Key MoversIn the United States on Friday US, economic data from the Department of Commerce revealed that the Fed’s favorite inflation gauge, the core PCE rose 4.6% YoY, beneath forecasts and a prior’s month reading of 4.7%. Headline inflation was 5%, beneath January’s 5.3%, signaling that the cumulative tightening by the Fed continues to temper inflation. The University of Michigan (UoM) showed that Consumer Sentiment on its final March reading was 62, worse than expected. At the same time, inflation expectations dropped. For the one-year horizon, the estimated inflation rate is 3.6%, while for the 5-year horizon, consumers estimate inflation to be 2.9%.
Inflation in the eurozone on Friday dropped significantly in March as energy prices continued to fall, while core expenses picked up to an all-time high. Headline inflation in the 20-member bloc came in at 6.9% in March, according to preliminary Eurostat figures released Friday. By comparison, in February, headline inflation stood at 8.5%. The main reason for this 1.6 percentage point fall was the drop in energy costs. However, other parts of the inflation basket remain stubbornly high. Food prices contributed the most to the overall inflation reading for March. Core inflation which excludes volatile energy, food, alcohol, and tobacco prices rose slightly from the previous month. It reached an all-time record of 5.7% in March, from 5.6% in February.
- AUD/USD: 0.6600 - 0.6800 ▼
- AUD/EUR: 0.6050 - 0.6250 ▼
- GBP/AUD: 1.8300 - 1.8500 ▲
- AUD/NZD: 1.0550 - 1.0750 ▼
- AUD/CAD: 0.8900 - 0.9100 ▼