AUD extends rebound as US yields move lower and PBOC firm on strategy
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Daily Currency Update
The Australian dollar extended its recovery through trade on Wednesday amid a flattening in US yields and stability in CNY fixing. With China returning from lunar new year celebrations, all eyes were on the People's Bank of China (PBOC) to see how they would respond to US tariffs and market pressures on the CNY. Officials maintained their strategy of stability, setting a higher daily fix, refusing to allow the greater depreciation despite rising trade tensions. The AUD climbed more than half a percent on the day to mark intraday highs just short of US$0.63.Our attentions now turn to a crowded macro docket as domestic trade balance numbers lead euro retail sales data, a Bank of England policy meeting and US jobs and earnings reports. Having bounced off lows below US$0.61, currency direction remains heavily influenced by US/China trade talks. Any further developments will be key in shaping sentiment.
Key Movers
The USD edged lower for the 2nd consecutive day, following yields lower. ISM services data showed a decline in activity through January, marking a 7-month low, suggesting that concern surrounding the impact of potential tariffs is beginning to seep into expectations and sentiment. The softer read, coupled with a stock standard US treasury refinancing plan, drove US yields and the US dollar lower. The JPY, AUD and NZD were the day's big benefactors, while the GBP and euro enjoyed subdued gains. The JPY jumped over 1.2% to force the USD back toward 152.50, as the decline in US yields coincided with solid gains across Japan's December wage data, vindicating the Bank of Japan’s decision to raise rates last month and to continue with a rebalancing plan.Our attentions remain with the new US administration and its evolving tariff program, while European retail sales data, the Bank of England policy meeting and US jobs and earnings reports headline the macro docket.
Expected Ranges
- AUD/USD: 0.6100 - 0.6320 ▲
- AUD/EUR: 0.5950 - 0.6080 ▲
- GBP/AUD: 1.9700 - 2.0100 ▼
- AUD/NZD: 1.1000 - 1.1100 ▼
- AUD/CAD: 0.8950 - 0.9050 ▲