Daily Currency Update
The Australian dollar extended its recovery through trade on Monday as last weeks risk on pivot continued into the new trading week. Key equity indices edged higher as markets correct against recent losses and the move into oversold territories while improved Covid reports from China helped bolster risk sentiment. China recorded its lowest daily case total in 3 months allowing officials to support an easing of restriction in Shanghai, Beijing and other key provinces. Commodity prices, led by oil, rallied on expectations of increased demand from China, helping the AUD surge beyond 0.7150 to touch intraday highs at 0.72. With the USD under pressure and price action thin over the memorial day public holiday the AUD has maintained gains into this mornings open where it buys 0.7198 US cents. The domestic docket offers few headline data items ahead of tomorrows quarterly GDP print and our attentions remain with the broader global narrative. Attentions have shifted away from inflation pressures and toward growth concerns. With the USD under pressure and markets repricing H2 growth expectations there is scope for the AUD to sustain its recent upward push with a break above resistance at 0.72/20 opening the door for a extension toward 0.73 US cents.
Key Movers
Despite the Memorial Day Public Holiday in the US there was plenty of price action across major currencies as the US extended last week downward correction on the heels of a sustained risk on move and an upside shock in German inflation pressures. Markets retained last week’s risk sentiment as China continues to report improved COVID case number and hopes a reduction in lockdowns will ease pressures on the global supply chain elevated commodity prices and investors confidence. The USD edged lower through the Asian session before shifting sharply downward following a surprise German inflation print. Germany’s CPI index surged 1.1% in May more than half a percent above expectations. The upside surprise forced the annual inflation rate to 8.7%, a multi decade high, and heaps more pressure on the ECB to raise rates out of negative territory at its policy meeting next week. With markets moving to price in 100 basis point hike in the underlying Euro cash rate before years end and ECB officials signaling at least two rate adjustments Euro rates surged and the Euro rallied to touch intraday highs at 1.0785. The move in European and global rates forced the JPY lower against its major counterparts with the Yen the worst performer on the day. Our attentions turn now to broader Euro Area CPI and US Consumer confidence data for direction through trade on Tuesday.
Expected Ranges
- AUD/USD: 0.7080 - 0.7230 ▲
- AUD/EUR: 0.6620 - 0.6720 ▼
- GBP/AUD: 1.7470 - 1.7670 ▼
- AUD/NZD: 1.0950 - 1.1020 ▲
- AUD/CAD: 0.9080 - 0.9130 ▲