Home Daily Commentaries Aussie dollar unable to hold on to gains above 64 US cents

Aussie dollar unable to hold on to gains above 64 US cents

Thursday 3 November, 2022

Daily Currency Update

The Aussie dollar is slightly weaker this morning when valued against the greenback. The US dollar reacted negatively immediately after the release of the Federal Reserve’s monetary policy decision. The Aussie, which had been trading within a tight range above US$0.6400, has surged to session highs at US$0.6470. The AUD/USD pair is moving sideways with a neutral outlook in the short term. A slide below US$0.6340, would increase the bearish pressure, exposing 0.6250/60. On the upside, above US$0.6450, the Australian dollar could gain momentum and the crucial resistance is located around US$0.6530. The AUD/USD is currently trading at 0.6361 at the time of writing. On the data front yesterday we saw the release of the AIG Manufacturing Index which eased slightly in October, dropping 0.6 points to a broadly stable 49.6 (readings below 50 points indicate contraction in activity, with lower results indicating a faster rate of contraction). This is the third month of flat conditions, following positive results between February and July. The Australian Bureau of Statistics released the latest monthly Building Approvals which saw in the month of September total dwellings approved fell 5.8%, private sector houses approved fell 7.8%, while private sector dwellings excluding houses declined 1.8%. Looking ahead today and we will see the release of Trade Balance at 11.30am AEDT.

Key Movers

The main focus overnight has been on the Fed’s 75bps hike this morning, with a notable dovish pivot in the FOMC statement. This supported US equities, drove US Treasury yields lower and the USD lower. As we go to print, Chair Powell conveyed a hawkish message and some of that initial move has faded. As widely expected, the Fed raised the Fed Funds target range by 75bps to 3.75-4.0%. Of most interest to the market, the Fed included forward guidance that “in determining the pace of future increases in the target range, the Committee will take into account the cumulative tightening of monetary policy, the lags with which monetary policy affects economic activity and inflation, and economic and financial developments”. Looking ahead today and the key event is the Bank of England’s policy update, where almost all economists are picking a 75bps hike in Bank Rate to 3.0% and this is fully priced. There will be more interest in how much higher the Bank is prepared to take rates, ahead of the pending economic recession and fiscal austerity. The key economic release is the US ISM services index, where the consensus sees some slippage to 55.3.

Expected Ranges

  • AUD/USD: 0.6250 - 0.6450 ▼
  • AUD/EUR: 0.6350 - 0.6550 ▼
  • GBP/AUD: 1.7800 - 1.8000 ▲
  • AUD/NZD: 1.0800 - 1.1000 ▼
  • AUD/CAD: 0.8600 - 0.8800 ▲