Home Daily Commentaries Aussie dollar holds on to 69 US cents

Aussie dollar holds on to 69 US cents

Daily Currency Update

The Australian dollar is slightly weaker this morning when valued against the Greenback. The Aussie dollar finishes Friday’s session with minimal losses down 0.22%. Market participants ramped up expectations for additional interest rate increases by the RBA, which hiked rates by 25 bps on Tuesday, and stated that further tightening would be needed after lifting rates to the 3.35% threshold. Last week's combination of supporting factors assists the US Dollar to stand tall near a one-month high, which exerts some downward pressure on the AUD/USD pair. Against the backdrop of hawkish signals from Fed officials, a fresh wave of the global risk-aversion trade provides a lift to the safe-haven buck. Investors remain worried about economic headwinds stemming from rapidly rising borrowing costs. Adding to this, the deeply inverted US Treasury yield curve point to growing concerns about looming recession risks. This is seen as another factor that contributes to driving flows away from the risk-sensitive Aussie.
Looking ahead this week and on Monday there are no scheduled releases. On Tuesday we will see the release of the Westpac Consumer Sentiment. Financial confidence is a leading indicator of consumer spending, which accounts for a majority of overall economic activity. We will also see the release of the National Australia Bank (NAB) Business Confidence survey of about 350 businesses which asks respondents to rate the relative level of current business conditions. On Wednesday Reserve Bank of Australia (RBA) Governor Philip Lowe is due to testify before the Senate Economics Legislation Committee, in Canberra. Volatility is often experienced during his speeches as traders attempt to decipher interest rate clues. Finally, on Thursday the Australian Bureau of Statistics will release the Unemployment data which is expected to remain steady at 3.5%.

Key Movers

The key headlines on Friday in the US the University of Michigan (UoM) reported that Consumer Sentiment surpassed predictions of 65 and increased to 66.4, indicating a better financial situation. In addition, the expected inflation rate for the year rose from 3.9% in January’s final reading to 4.2%, while the inflation estimations for a five-year period remained steady at 2.9%. While during the European session, the UK economic docket revealed that GDP for the last three months of 2022 stood at 0% and avoided entering a recession, foresaw by the Bank of England (BoE). On a monthly basis, December’s GDP contracted by -0.5%, reported the Office for National Statistics (ONS). In the meantime, a gloomy scenario in the UK suggests that the British Pound (GBP) would be under pressure as the BoE struggles to tame inflation which reached a 41-year high at 11.1% in October of 2022. The Bank of England’s latest monetary policy meeting revealed a split vote amongst its members. The BoE forward discussions and guidance would be interesting, which could reassure the central bank’s commitment to tackle inflation.

Expected Ranges

  • AUD/USD: 0.6800 - 0.7000 ▼
  • AUD/EUR: 0.6350 - 0.6550 ▼
  • GBP/AUD: 1.7250 - 1.7450 ▲
  • AUD/NZD: 1.0800 - 1.1000 ▲
  • AUD/CAD: 0.9100 - 0.9300 ▲