AUD edges lower as attentions turn to US inflation update
Wednesday 10 May, 2023
Daily Currency UpdateThe Australian dollar retreated through trade on Tuesday, unable to extend gains beyond resistance at US$0.6785/90. The Australian Budget offered a much better fiscal outlook than that projected 6 months ago with a small surplus projected for FY 23 and narrower deficits priced in for coming years. Despite a downturn in debt projections, the budget offered the AUD little support and the currency tracked sideways through much of the domestic session before sliding back below US$0.6750 overnight. President Biden’s meeting with House Speaker McCarthy to discuss the looming debt ceiling crisis and headline CPI data weighed on investors prompting analysts to adopt a more cautious tone and a move toward haven assets. Having touched intraday lows at US$0.6747 the AUD opens this morning buying US$0.6760. With little of note on the domestic ticket, our attention turn to US CPI data tonight. With consensus expectations predicting a small lift in core price pressures, our focus will be keenly attuned to the breakdown of inflation drivers, with a particular focus on service sectors. Even a print in line with expectations will afford the Fed little comfort. Anything short of a marked decline in price pressures will all but sure up at least one more rate hike.
Key MoversThe US dollar was stronger through trade on Tuesday as markets adopted a more cautious tone ahead of key risk events. President Biden is set to meet with House Speaker Kevin McCarthy in a bid to alleviate pressures caused by the looming debt ceiling issue. With Republicans calling for strict spending cuts and budget restraint we don’t anticipate a deal will be agreed upon at this meeting. Instead at best a small extension will be afforded ensuring the risk of missed interest repayments on US debt is avoided until firm resolution is agreed. Without firm action Treasury Secretary Janet Yellen warned the US could default on its June 1 repayments. With market uncertainty elevated investors appeared content in chasing haven assets and turning our attention to tonight’s US CPI print. With little hope of a consolidated decline in price pressures, we turn our focus to the breakdown in inflation. With service sector costs continuing to rise we are keenly attuned to any further extension in service costs, pricing a small lift in headline and core price pressures. With markets adopting a risk-off tone the euro slid below US$1.0950, While the pound tracked sideways ahead of tomorrow’s Bank of England Policy update and the yen more or less traded flat.
- AUD/USD: 0.6650 - 0.6830 ▼
- AUD/EUR: 0.6080 - 0.6220 ▼
- GBP/AUD: 1.8480 - 1.8720 ▲
- AUD/NZD: 1.0650 - 1.0750 ▼
- AUD/CAD: 0.8980 - 0.9120 ▼