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AUD buoyed by weaker US dollar

Daily Currency Update

The Australian dollar lifted back above US$0.68 on Wednesday, buoyed by a broadly weaker US dollar. The AUD faced downward pressure through the domestic session as equities and risk assets continued to slide amid a risk-off backdrop stemming from growing concerns China officials are not doing enough to stimulate a greater economic response and recovery, given the tepid post covid performance. The Yuan slid lower, dragging the AUD toward intraday lows at US$0.6745 before supports kicked in. A weaker USD helped the AUD climb back toward US$0.68, briefly poking through the barrier before settling marginally lower on open this morning.

Our attentions turn now to the Bank of England and its latest policy offering while Jerome Powell appears before lawmakers again in the 2nd day of his semi-annual congressional address and US jobless claims provide guidance on a faltering labour market.

Key Movers

UK Inflation printed higher than anticipated on Wednesday, with both headline and core CPI printing above consensus expectations. Core inflation surged through 7% marking a 31-year high at 7.1%, all but ensuring the Bank of England will need to maintain tighter monetary policy for longer. Having issued 12 consecutive rate hikes, we fully expect the Monetary Policy Committee (MPC) will deliver a 13th hike when they meet this evening. With the peak fund rate now expected to reach 6%, UK gilt yields continued their push higher. The British Pound was unable to maintain its recent upward momentum, sliding below 1.27 following the data drop amid elevated concerns higher interest rates and sustained inflation will create a cycle of stagflation, weighing on growth. Despite Sterling's selling pressure, the US dollar was broadly weaker following commentary from Fed Chair Jerome Powell. Powell delivered his semi-annual congressional address where he suggested policymakers expect to need to move rates higher restricting growth. With focus now shifting away from yields toward the restrictive impact of higher interest rates the USD has come under increased scrutiny. Amid a backdrop of a weaker US dollar, the Euro punched back through 1.10 while the Yen faltered as global rates surged higher.

Our attentions turn now to the Bank of England Policy Meeting, US jobless claims data and more Fed commentary.

Expected Ranges

  • AUD/USD: 0.6720 - 0.6880 ▲
  • AUD/EUR: 0.6150 - 0.6250 ▼
  • GBP/AUD: 1.8700 - 1.8900 ▲
  • AUD/NZD: 1.0920 - 1.1020 ▼
  • AUD/CAD: 0.8880 - 0.8980 ▼