Home Daily Commentaries Aussie dollar trades below 68 US cents

Aussie dollar trades below 68 US cents

Daily Currency Update

The Australian dollar is slightly weaker this morning trading below 68 US cents on modest USD strength. The Australian dollar began trading near the day high at around 0.6769 but tumbled towards its daily low at 0.6713, on remarks of the Reserve Bank Governor Philip Lowe. Governor Philip Lowe has admitted the inflation surge in Australia was a "very large forecast missed" but said he has "no plans to resign" amid criticism from politicians across the spectrum. On Tuesday, the RBA lifted the official cash rate for a fifth consecutive month by another 0.5 per cent to 2.35 per cent amid an inflation crisis. A year ago the RBA was forecasting that inflation in 2022 would be just 1.75 per cent. Now we’re expecting CPI inflation to be around 7.75 per cent. Governor Philip Lowe noted the inflation pick-up came as a "surprise to everyone" including those overseas.
On the data front yesterday the seasonally adjusted balance on goods and services surplus decreased $8,398m to $8,733m in July. Goods and services credits (exports) fell $6,077m (9.9%) to $55,282m, driven by falls in Coal, coke, and briquettes, Metals ores, and minerals. Goods and services debits (imports) rose $2,321m (5.2%) to $46,549m, driven by a rise in Travel debits. Looking ahead today and there are no scheduled releases in Australia.

Key Movers

The US dollar and shorter-dated US Treasury yields climbed on Thursday on the back of Federal Reserve Chair Jerome Powell's comments who said that the Fed was "strongly committed" to controlling inflation. Fed Chair Powell reiterated his hawkish message of Jackson Hole saying “we need to act now, forthrightly, strongly as we have been doing”. It all but seals the deal for another 75bps hike at the next FOMC meeting later this month. Market pricing for the meeting lifted again, now at 72bps, up from 64bps at the beginning of the week. On the data front yesterday the US published Initial Jobless Claims for the week ended September 2, which contracted to 222K, beating the market’s expectations.
As widely anticipated, the European Central Bank hiked policy rates by 75bps, taking the deposit rate to 0.75% and delivering a hawkish outlook. The Bank’s inflation forecasts were ramped higher, with the CPI still averaging an above-target 2.3% in 2024. The central bank upwardly revised the inflation projections to an average of 8.1% in 2022, 5.5% in 2023 and 2.3% in 2024. Policymakers also expect the economy to keep growing regardless of signs of recession, with the annual GDP seen up by 3.1% in 2022, 0.9% in 2023 and 1.9% in 2024. Additionally, the statement shows that further rate hikes are on the docket.

Expected Ranges

  • AUD/USD: 0.6650 - 0.6850 ▼
  • AUD/EUR: 0.6650 - 0.6850 ▲
  • GBP/AUD: 1.6950 - 1.7150 ▼
  • AUD/NZD: 1.1050 - 1.1250 ▲
  • AUD/CAD: 0.8750 - 0.8950 ▲