Home Daily Commentaries Prices are up; hotter than expected inflation print lifts AUD and helps counter USD surge

Prices are up; hotter than expected inflation print lifts AUD and helps counter USD surge

Matt Richardson
Written by
Matt Richardson

Matt Richardson

OFXpert

Matt provides expertise in currency risk management to his clients, drawing from his 14 years of experience in foreign exchange.

| Thursday 27 June, 2024

Daily Currency Update

The Australian dollar was lively through trade on Wednesday, testing the upper end of recent ranges following a hotter-than-expected inflation update. Inflation in May showed an annual lift in prices of 4%, two-tenths of a per cent above market estimates and 0.4% up on the April read. The upside surprise came on the heels of comments from RBA Assistant Governor, Christopher Kent wherein he noted the Bank “needs to remain vigilant to upside risks to inflation”. With the May print highlighting the stickiness of price pressures, particularly across the service sector investors moved to adjust rate expectations. Calls for a final rate hike in August jumped while the timing and trajectory of rate cuts have been pushed well into 2025. The Australian dollar lurched up through US$0.6675 and tested resistance at US$0.6690 before a softer People's Bank of China CNY reference rate setting and further depreciation in the yuan and yen weighed on the AUD, prompting a move back toward US$0.6650 overnight.

Our attention now turns to local jobs data and commentary from RBA policymakers ahead of Japanese Retail Sales, European Consumer and Industrial Sentiment data. As well as the US Jobless claims, durable goods orders and Q1 GDP data.

Key Movers

While still traversing well-contained ranges, price action across majors was much more lively through trade on Wednesday. The US dollar advanced across the board amid an uptick in US yields and general risk off-tone. The USDCNY traded up through 7.2650 to mark fresh highs at 7.2670 and with the yuan’s offshore derivative, the CNH breaking 7.30 further yuan weakness lies ahead. With US yields higher the Japanese yen continued its precipitous sell allowing the USD to punch through 160, extending to a 38-year high at 160.84 with little sign of intervention. Markets will be wary of extending gains beyond this level and the pace of upside moves may slow as 160 was previously presumed to be the point of intervention. The JPY is the weakest of the majors yet all gave up sizeable ground to the USD through Wednesday. The NZD and GBP are both down half a percent while the EUR, CAD and CHF all gave up 0.3%. The AUD is the only unit to close the day flat against the USD, buoyed by the robust local inflation print.

Our attention now turns to Japanese Retail Sales, European Consumer and Industrial Sentiment data, US Jobless claims, durable goods orders and Q1 GDP data.

Expected Ranges

  • AUD/USD: 0.6580 - 0.6700 ▲
  • AUD/EUR: 0.6180 - 0.6250 ▲
  • GBP/AUD: 1.8900 - 1.9100 ▼
  • AUD/NZD: 1.0880 - 1.1000 ▲
  • AUD/CAD: 0.9050 - 0.9150 ▲

Written by

Matt Richardson

OFXpert

As a Senior Corporate Client Manager, Matt provides expertise in currency risk management to his clients, drawing from his 14 years of experience in foreign exchange. Matt has clients who he has been working with for over a decade, a testament to his knowledge and dedication in the field. Matt is also a regular contributor on Ausbiz, offering clear and precise updates on currency market trends, showcasing his ability to interpret complex financial data into actionable insights.