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AUD tracks sideways as markets seek catalyst for change

Daily Currency Update

The AUD tracked sideways through trade on Monday in a quiet start to the week. An absence of headline news flow and ongoing uncertainty surrounding US debt ceiling negotiations allowed investors to sideline major bets. Having found support on moves approaching US$0.66, the AUD struggled on moves above US$0.6650 and is now firmly entrenched within broader support and resistance handles.

After the uncertainty of the March banking crisis, the AUD has tracked between US$0.6580 and US$0.68. Unable to shake off near-term yield disadvantages and extend toward US$0.70, yet supported by longer-run expectations of a correction in rates and inflation pressures the AUD is unlikely to see any significant shift in fortunes until a break in the current narrative emerges.

In the absence of a significant market shock, we anticipate the AUD will track within well-defined ranges through Q2 and much of Q3 ahead with any Q4 breakout dependent on the inflation and rate environment.

Key Movers

There is little to report this morning as investors sidelined major bets Monday. An absence of headline data flow and mixed messaging from Fed policymakers and US debt ceiling negotiators ensured price action was well contained. The only notable mover is the Japanese yen. Higher US treasury yields and an elevated global rates backdrop saw the JPY weaken, marking 12-month lows against the NZD and giving up ground across the board.

We expect little progress today while attentions remain on US debt ceiling negotiations. Commentary from both sides suggests a deal is still some way off, yet the market remains optimistic a compromise will be struck. US and European PMI data dominate the macroeconomic ticket.

We expect the gap between service and manufacturing activity in Europe to close as service activity slows and manufacturing production steadies, while US data should signal a broader economic slowdown. Anything short of a significant market shock will have little impact on near-term rate expectations and we expect price action will be well contained.

Expected Ranges

  • AUD/USD: 0.6600 - 0.6700 ▼
  • AUD/EUR: 0.6120 - 0.6180 ▼
  • GBP/AUD: 1.8620 - 1.8820 ▼
  • AUD/NZD: 1.0550 - 1.0650 ▼
  • AUD/CAD: 0.8950 - 0.9030 ▼