AUD surges as US inflation pressures ease
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Daily Currency Update
The Australian dollar surged overnight, falling just short of US$0.67 amid a broad-based USD sell-off. Markets largely ignored domestic wage data after the Wage Price Index printed marginally below expectations and in line with RBA estimates. Wage pressures appear to have past their peak allowing markets to price out the prospect of further RBA rate hikes. The print had little impact on AUD value as markets sidelined major bets ahead of key US inflation data. The US CPI report for April printed in line with expectations, a relief for markets and Fed officials after a string of upside surprises. The AUD, having traded sideways leading into the data release, lurched upward, climbing through US$0.6650 to mark intraday highs at US$0.6694.Our attention turns now to domestic employment data, with jobs growth and unemployment numbers headlining the docket, while Japan's GDP data and US jobless claims dominate the offshore ticket. We are keenly watching resistance at US$0.67 for any sign of an extended AUD breakout.
Key Movers
The US dollar fell sharply through trade on Wednesday following the April CPI report. After a string of positive data surprises through January, February and March, April's print was as expected, bringing relief for analysts and Fed officials and allowing investors to temper expectations for another Fed rate hike and firm up bets for a September rate cut. Markets have now priced a 99% probability of a September rate adjustment, up from 81% leading into the print, while 2 cuts are now forecast before year-end. US yields were lower across the curve with both 2 and 10-year rates falling. The USD DXY index gave up 0.7% as the euro lurched back toward 1.09 the GBP climbed toward 1.27 and the yen pushed the US dollar back below 155.Our attention turns now to US jobless claims, Japanese GDP data and the ECB’s Financial Stability Review.
Expected Ranges
- AUD/USD: 0.6580 - 0.6720 ▲
- AUD/EUR: 0.6100 - 0.6200 ▲
- GBP/AUD: 1.8800 - 1.9100 ▼
- AUD/NZD: 1.0900 - 1.1000 ▼
- AUD/CAD: 0.9030 - 0.9130 ▲