AUD buoyed as markets firm bets for a 50-point cut
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Daily Currency Update
The Australian dollar advanced through trade on Monday as markets prepare for this week's all-important Fed policy meeting. Betting for a 50-point rate cut has firmed since Friday as markets elevate calls for policymakers to front-load rate cuts amid signs the US economy is rumbling toward recession.With US rates forced lower and the USD broadly softer, the AUD pitched back above US$0.67, marking session highs at US$0.6740 while tracking sideways against the NZD and GBP. It enjoyed modest gains against the euro and edged lower against the outperforming JPY.
There is little of note on today’s domestic ticket and our attentions remain squarely on the Fed policy meeting and market rate expectations for direction through trade this week.
Key Movers
The US dollar tracked lower through trade on Monday as markets prepare positions ahead of this week’s much anticipated Fed policy meeting. Analysts have elevated calls for the Federal Open Market Committee (FOMC) to front-load rate cuts and issue a 50-point rate adjustment.Articles in the Financial Times and Wall Street Journal Friday prompted traders to firm bets for a larger hike, while comments at the weekend by NY Fed President Dudley allowed them to double down as Dudley opined the “Fed should go big now and I think it will”.
Markets have now priced a 41-point cut or a 65% probability of a 50-point rate adjustment forcing US treasuries and the dollar lower. The DXY index is 0.4% lower as the yen led gains against lower US rates, the pound was the best-performing European currency and the euro enjoyed only modest gains.
Our attention this week remains firmly affixed to the FOMC policy meeting and statement with US retail sales and Canadian CPI data providing some colour through trade today.
Expected Ranges
- AUD/USD: 0.6620 - 0.6800 ▲
- AUD/EUR: 0.6000 - 0.6100 ▲
- GBP/AUD: 1.9400 - 1.9600 ▼
- AUD/NZD: 1.0850 - 1.0950 ▲
- AUD/CAD: 0.9120 - 0.9220 ▲