Aussie range bound as attentions turn to next week’s inflation update
Thursday 20 April, 2023
Daily Currency UpdateThe Australian dollar remained firmly entrenched within a narrow band through trade on Wednesday, bouncing between US$0.6690 and US$0.6740. Despite a surge in global rates and higher US treasury yields price, action across currency markets was largely subdued. With little of note on the macroeconomic docket, it appears investors are content in maintaining positions until a catalyst for change presents itself. The AUD has been trapped between US$.66 and $US0.68 for a little over a month now as near-term US interest rate expectations battle longer-run recessionary fears. For now, the broader market narrative remains supportive of higher US interest rates and higher US yields. However, with growing evidence the US economy is beginning to lose momentum and strong signals that China is rapidly recovering ground lost through extended Covid lockdowns, the AUD could break resistance, extending back toward 0.69 and 0.70 through Q3 and Q4.
Our attention turns now to NZ quarterly CPI data and commentary from RBA Governor, Philip Lowe, for direction through the local session while US unemployment claims headline the overnight docket.
Key MoversPrice action across majors was largely muted on Wednesday with net movements well contained. The GBP enjoyed a 100-point range, swinging back and forth as investors responded to a higher-than-anticipated CPI print. UK inflation remains above 10% year on year, defying expectations of a move back toward single digits. Food prices and energy costs contributed to the stubbornly sticky headline print as the cost of groceries reached new highs, up 19.1%. Sticky price pressures all but guarantee tighter Bank of England Monetary Policy through the near-term, adding some yield support to the GBP. Having touched intraday highs at 1.2470, the GBP retreated into this morning's open, sliding back below 1.2450.
The CAD was the weakest major unit overnight, down half a percent following a sharp contraction in oil prices, while the JPY continues to face headwinds amid a backdrop of higher global rates and widening central bank policy expectations. Hopes the Bank of Japan may tweak or do away with its yield curve control program and next month's meeting have been dashed following Bloomberg reporting that suggests officials remain wary of moving too soon, a fear exacerbated by last month's US banking crisis. With the BoJ’s penchant for easy monetary policy, the JPY will continue to face near-term headwinds.
Our attentions today turn to commentary from Fed officials ahead of a stacked Service and Manufacturing PMI update Friday.
- AUD/USD: 0.6620 - 0.6750 ▼
- AUD/EUR: 0.6080 - 0.6180 ▼
- GBP/AUD: 1.8280 - 1.8620 ▲
- AUD/NZD: 1.0780 - 1.0880 ▼
- AUD/CAD: 0.8980 - 0.9080 ▲