Australian dollar stabilises below US$0.69
Wednesday 22 February, 2023
Daily Currency UpdateThe Australian dollar is slightly weaker this morning when valued against the US dollar. The AUD/USD pair comes under some renewed selling pressure on Tuesday and reverses a major part of the previous day's positive move. The pair remains depressed below the US$0.6900 mark through the first half of the European session. Market sentiment remains fragile amid growing worries about economic headwinds stemming from rapidly rising borrowing costs which are also tempering investors' appetite for riskier assets of which the Australian is one. It was widely anticipated that Reserve Bank of Australia Governor Philip Lowe would be advocating for more interest rate hikes as Australian inflation is critically stubborn. The Australian Consumer Price Index (CPI) has refreshed its multi-decade of 7.8% and is showing no signs of softening ahead in spite of the fact that the Official Cash Rate (OCR) has been already pushed to 3.35%. The message from the RBA minutes was clear that more interest rates are warranted as strong consumer demand is not allowing Australian inflation to soften from its peak. According to the RBA minutes, policymakers also considered the option of 50 basis points (bps) interest rate hike considering the persistence of inflation. Looking ahead today on the data front and the Australian Bureau of Statistics will release the quarterly Wage Price Index which is a leading indicator of consumer inflation, when businesses pay more for labour the higher costs are usually passed on to the consumer. We will also see the release of the quarterly Construction Work Done. It's an important gauge of the construction industry, which has a sizable impact on overall employment and spending and gives insight into the GDP data which is released about a week later. On Thursday RBA Deputy Governor Michele Bullock is due to testify before the Parliamentary Joint Committee on Corporations and Financial Services, in Sydney. She's responsible for advising Reserve Bank Board members who decide where to set the nation's key interest rates on matters relating to economics, and her public engagements are often used to drop subtle clues regarding future policy shifts.
Key MoversBusiness activity in the US services sector expanded in early February following January's contraction with S&P Global Services PMI rising to 50.5 from 46.8 in January. This reading surpassed the market expectation of 47.2. Additionally, the Manufacturing PMI edged higher to 47.8 from 46.9, compared to analysts' estimate of 47.3, and the Composite PMI improved to 50.2 from 46.8. As a result, the US dollar gathered strength against its rivals with the initial reaction and the US Dollar Index was last seen rising 0.35% on the day at 104.22. In other news, U.S. existing home sales dropped to the lowest level in more than 12 years in January, but the pace of decline slowed, raising cautious optimism that the housing market slump could be close to reaching a bottom. The report from the National Association of Realtors on Tuesday also showed the smallest increase in annual house prices since 2012, which should help to improve affordability. It will, however, be a while before the housing market turns the corner. The housing market has been the biggest casualty of the Fed's aggressive monetary policy tightening. Residential investment has contracted for seven straight quarters, the longest such stretch since 2009. The 30-year fixed mortgage rate rose to an average of 6.32% last week from 6.12% the prior week, according to data from mortgage finance agency Freddie Mac. The second straight weekly increase reflected a spike in U.S. Treasury yields.
- AUD/USD: 0.6750 - 0.6950 ▼
- AUD/EUR: 0.6350 - 0.6550 ▼
- GBP/AUD: 1.7550 - 1.7750 ▲
- AUD/NZD: 1.0950 - 1.1050 ▲
- AUD/CAD: 0.9150 - 0.9350 ▼