AUD remains under pressure as investors price in additional Fed rate hikes
Tuesday 28 February, 2023
Daily Currency UpdateThe Australian dollar tracked sideways through trade on Monday in what was a relatively quiet start to the week when compared with the tumult caused by another US data surprise on Friday. With month-end approaching, investors appeared content in squaring positions and sidelining major bets ahead of key CPI and GDP data due later this week. With risk-off, the AUD tracked toward intraday lows at US$0.67, before finding some support and climbing back toward the daily open at US$0.6745 overnight. Softer than anticipated US durable goods data coupled with reports the UK and EU have agreed to a new trade deal, which softens protocols surrounding the only shared border in Ireland, helped alleviate risk aversion and prop up the AUD. Market attention remains affixed to near-term Fed policy expectations. With 3 hikes now priced in and a fourth more than likely, the AUD will need to weather a sustained run of downward pressure and could test supports approaching US$0.6680. Domestic retail sales and current account data will provide valuable insight into domestic economic performance ahead of Thursday’s all-important inflation print. With inflation pressures refusing to ease, we expect some repricing of rate expectations and potentially the AUD in the wake of the CPI update.
Key MoversThe GBP was the standout performer through trade on Monday, climbing nearly 1% on the heels of reports the UK and EU have finally agreed to a new trade deal, which softens protocols surrounding the Northern Ireland border. The only shared land border has been a sticking point throughout the entirety of the Brexit process. The newly announced deal is said to reduce much of the trade and logistics issues that have plagued activity. While the agreement still needs to be ratified in parliament, the mood is much improved lifting the GBP back above 1.20. The positive sentiment has spilled over into the euro with the single currency up half a per cent, climbing back above 1.06 to touch session highs just shy of 1.0620. With little of note on today’s macroeconomic ticket attention remains affixed to price action across rates and treasuries as a key marker driving risk appetite.
- AUD/USD: 0.6680 - 0.6800 ▼
- AUD/EUR: 0.6320 - 0.6390 ▼
- GBP/AUD: 1.7750 - 1.8020 ▲
- AUD/NZD: 1.0880 - 1.0950 ▲
- AUD/CAD: 0.9080 - 0.9180 ▼