Home Daily Commentaries AUD buoyed by a rebound in consumer spending

AUD buoyed by a rebound in consumer spending

Daily Currency Update

The Australian dollar bounced off lows below US$0.66 following a stronger-than-anticipated retail sales performance in May. Australian consumer spending rose near three-quarters of a percent rejuvenating calls for the RBA to hike rates next week. After Wednesday's softer-than-anticipated CPI update the surge in spending has clouded analyst expectations leading into next week's policy meeting and helped reverse the post-CPI rate correction. Having touched intraday lows at US$0.6595 the AUD found support in the stronger print climbing back above US$0.6620. The upswing was then underpinned by the Peoples Bank of China (PBOC) and the setting of a much stronger CNY reference rate. With the PBOC stepping back to defend the yuan demand for the AUD by proxy helped lift the currency toward intraday highs just short of US$0.6640. The AUD then tracked back toward US$0.6620 through the latter half of the overnight session as stronger-than-anticipated US data helped offset early USD losses.
Our attentions turn now to Tokyo CPI data, China PMI numbers, euro area CPI, US consumer spending and core PCE deflator data for direction into the weekly close.

Key Movers

Stronger than expected US macroeconomic data helped fuel an upswing in US rates through trade on Thursday, bolstering demand for the USD overnight. US jobless claims fell last week, moving against expectations for a sustained lift in unemployment, while Q1 GDP estimates were revised up and the PCD deflator index, a key measure of inflation, was revised down. The string of stronger data seen in recent weeks shows the US economy is performing better than estimated, affording the Fed and Federal Open Market Committee ample scope to keep lifting interest rates. US rates surged overnight with the likelihood of the Fed delivering at least two more rate hikes through November rising. The USD was boosted by the stronger data sets reversing losses suffered earlier in the session to trade marginally higher on the day. The dollar toward intraday highs at ¥144.90 against the yen and is now perilously close to levels at which the Bank of Japan and Ministry of Finance have intervened. After eyeing a break toward €1.10 the euro slipped back below €1.09 after German and Spanish CPI data printed largely in line with consensus expectations denying European rates the ability to keep up with rising US treasury yields.
Our attentions turn now to tonight's Euro Area CPI print. With the European Central Bank hinting at an extended period of tightening policy conditions an elevated read could all but lock in a 50-point rate hike at next month's policy meeting.

Expected Ranges

  • AUD/USD: 0.6580 - 0.6720 ▲
  • AUD/EUR: 0.6030 - 0.6130 ▲
  • GBP/AUD: 1.8980 - 1.9220 ▼
  • AUD/NZD: 1.0850 - 1.0950 ▲
  • AUD/CAD: 0.8730 - 0.8850 ▲