Home Daily Commentaries Australian dollars slips back into familiar trading pattern

Australian dollars slips back into familiar trading pattern

Daily Currency Update

The Australian dollar extended Friday’s recovery through trade on Monday, pushing through 0.7750 and slipping back into a narrow trading band. Last weeks break below supports at 0.7650 signaled a potential shift in underlying AUD momentum, opening the door to the prospect the currency may trade within a lower handle through the near term. Friday’s recovery and the subsequent risk on run has seemingly staved off any correction, allowing the AUD to recoup losses and maintain long term bullish estimates. With little of note on today’s domestic macroeconomic ticket our attentions turn to Thursday’s US CPI data print. Inflation concerns have eased since April’s bumper print, and we are keenly attuned to any sign inflation pressures may be more than a short term transitory byproduct of pandemic led supply constraints. Outperformance will likely drive another risk off run, adding mounting pressure on AUD supports.

Key Movers

The swift correction in USD fortunes extended through trade on Monday as the world’s base currency struggle to maintain the momentum enjoyed on Thursday in the lead up to Friday’s non-farm payroll print. The softer than anticipated payroll print and a sustained correction in US treasury yields forced the dollar index back toward multi year lows as the AUD and NZD led gains across majors. The GBP and Euro both outperformed through Monday with Sterling testing 1.42 again while the Euro fell agonizingly short of pushing back through 1.22. The Canadian dollar, while advancing against the USD, underperformed against other counterparts as local job’s data missed expectations. The poor print is attributed to the lockdown in Ontario and numbers are expected to bounce back next month, however they provide an interesting wrinkle ahead of this weeks Bank of Canada policy meeting. While we expect the BoC will maintain its current policy setting, it has adopted a more hawkish rhetoric in recent months as it works toward a rate adjustment in H2 2022. Alongside the Bank of Canada our attentions turn to US CPI data and the ECB policy meeting. There is some suggestion the ECB may announce an amendment in Bond purchases, having frontloaded buying early in the year. While we expect policy makers will maintain the current setting a shift in rhetoric could drive further Euro outperformance.

Expected Ranges

  • AUD/USD: 0.7650 - 0.7820 ▼
  • AUD/EUR: 0.6290 - 0.6420 ▲
  • GBP/AUD: 1.8120 - 1.8580 ▲
  • AUD/NZD: 1.0690 - 1.0770 ▲
  • AUD/CAD: 0.9260 - 0.9390 ▲