AUD range bound ahead of key inflation updates
Wednesday 1 March, 2023
Daily Currency UpdateThe Australian dollar opens this morning in much the same position as it started Tuesday, having maintained a narrow trading handle amid broader month-end rebalancing. With little of note on the days domestic docket the AUD drifted toward intraday lows just north of US$0.6705 before softer than anticipated US macroeconomic data helped provide a modicum of support, lifting the AUD toward session highs marginally above US$0.6750. All told the AUD was one of the worst performing major currencies through February and there were few signs yesterday the near-term trend will change. Fears monetary policy will remain restrictive for longer were exacerbated through February following a rebound in US economic activity and improvement in labour market conditions. With few signs global central banks will be afforded the conditions to loosen policy expectations, we imagine the AUD will continue to face near term headwinds through March. Our attentions today turn to Q4 GDP data and monthly CPI numbers for January. With GDP expected to show a modest expansion our primary focus remains with inflation. With prices expected to sit 8% higher than this time last year there is ample scope to suggest the RBA will need to deliver multiple rate hikes through the months ahead.
Key MoversEuropean inflation woes dominated direction through trade on Tuesday as French and Spanish CPI both rose at a faster pace than anticipated. The data suggests increased risk of an upside surprise in German price pressures and an uplift in broader euro area inflation. With inflation stubbornly refusing to yield to successive monetary policy adjustments, markets were forced to amend rate expectations lifting European yields and dragging US rates higher overnight. With 10-year rates approaching 4%, markets stepped in to defend key resistance handles as consumer confidence waned and broader macroeconomic activity continues to falter. The euro tested a break above 1.0640 before retracing gains late, while the GBP looked set to consolidate a break above 1.21 before retreating. Amid the higher rates backdrop the JPY continues to underperform, and the USD tested 137 before settling back nearer 136.20 on open this morning. With direction driven by inflation and monetary policy expectations our attentions today turn to German and Australian CPI data and US ISM manufacturing surveys.
- AUD/USD: 0.6680 - 0.6820 ▼
- AUD/EUR: 0.6320 - 0.6420 ▼
- GBP/AUD: 1.7780 - 1.8120 ▲
- AUD/NZD: 1.0850 - 1.0950 ▼
- AUD/CAD: 0.9080 - 0.9220 ▲