AUD ekes out gains following fall in US headline inflation
Thursday 13 April, 2023
Daily Currency UpdateThe Australian dollar eked out small gains through trade on Wednesday, clawing its way back toward US$0.67 on the heels of weaker than anticipated US inflation data. The latest US CPI report showed a sharper than anticipated decline in annual inflation. Headline CPI rose by 0.1%, dragging the annual rate of inflation down to 5%, its lowest level in almost two years. While core inflation remains stubbornly sticky the sharp decline in headline price pressures was enough to drive US treasury yields and the USD lower. The AUD climbed off intraday lows near US$0.6650, punching back above US$0.67 to mark intraday highs at US$0.6720 before meeting resistance and edging lower into the daily open. The AUD currently buys US$0.6690 as our attentions turn to local employment data. We expect figures will show sustained labour market growth and a largely steady unemployment rate. A stable print could push the RBA to reconsider pausing its tightening cycle, while a downturn in activity will only amplify calls for policymakers to allow more time for rate hikes to filter into the real economy. Offshore, we look to US jobless claims. With cracks appearing in the US labour market, we are watching for any sign of upward drift, particularly among recurring claims.
Key MoversThe US dollar fell against a basket of major counterparts following the latest monthly CPI update. The CPI report showed headline inflation declined at a faster pace than anticipated, dragging the annual rate of inflation to its lowest level in nearly two years. US treasury yields and the dollar fell sharply in the minutes immediately following the release, yet losses faded as markets began to dive in and digest the data. Despite a decline in headline price pressures, core inflation remains stubbornly sticky elevating calls for another Fed rate hike next month. The market remains wary of sustained inflation pressures even as the Fed narrative becomes more nuanced. A number of Fed speakers hit the wires on Wednesday and comments were mixed, with some voting members pointing to signs of economic slowdown and warning against overtightening while others clung to stubbornly high core inflation as a reason to continue raising rates. With the outlook somewhat more clouded, the Euro traded back above 1.09 and climbed toward 1.10 while the GBP looks set to punch above 1.25. Our attentions turn now to US jobless claims and PPI inflation ahead of an all-important retail sales print and consumer confidence update on Friday.
- AUD/USD: 0.6620 - 0.6750 ▲
- AUD/EUR: 0.6050 - 0.6150 ▼
- GBP/AUD: 1.8420 - 1.8720 ▼
- AUD/NZD: 1.0720 - 1.0820 ▲
- AUD/CAD: 0.8920 - 0.9050 ▲