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AUD edges higher as all eyes turn to US inflation data

Thursday 10 February, 2022

Daily Currency Update

The Australian dollar again maintained a narrow trading handle as investors sidelined major bets ahead of tonight’s all-important US CPI print. Having tracked between 0.7140 and 0.7165 for much of the domestic session, the AUD found momentum from the start of the European trading day advancing toward intraday highs just shy of 0.72 US cents. Risk appetite rose as the downward pressure on global bond rates eased prompting an uptick across equities and risk assets. Having touched intraday highs at 0.7195 our attentions turn now to US CPI data. We anticipate a slight easing in price pressures through January with annualised inflation rates still shockingly elevated.  A surprise above 7.3% across headline data points and 5.9% across core items could spur volatility as markets again push Fed rate expectations.

Key Movers

Outside the AUD and NZD, price action across the majors was modest through Wednesday with most investors sidelining major bets until after the US CPI print. With the EUR, GBP and JPY all flat when pared back against the USD, the AUD and NZD have enjoyed strong gains across key crosses. The AUD has pushed back toward 0.63 against the EUR while breaking back above 0.53 against the GBP with the NZD breaking 0.5850 against the EUR and closing in on 0.4950 against the GBP. After last week's hawkish pivot, the ECB and BoE are attempting to water down market expectations with the BoE arguing a measured data-dependent approach will be applied when adjusting policy. We expect little price action through the Asian session with markets withholding moves until US CPI data is released. While we expect a moderation in pressures through January, an elevated read will all but guarantee a 50-basis point hike is priced in next month. On the other hand, a miss to the downside could add weight to recent USD softness as investors scramble to moderate rate hike expectations.

Expected Ranges

  • AUD/USD: 0.7080 - 0.7250 ▲
  • AUD/EUR: 0.6230 - 0.6330 ▲
  • GBP/AUD: 1.8720 - 1.9020 ▼
  • AUD/NZD: 1.0680 - 1.0780 ▼
  • AUD/CAD: 0.9020 - 0.9150 ▲