Home Daily Commentaries Aussie dollar holds above 65 US cents

Aussie dollar holds above 65 US cents

Daily Currency Update

The Australian dollar is slightly weaker this morning when valued against the Greenback currently trading at its year-low 0.6517. The AUD/USD pair continued its downward trend on Friday. However, this decline occurs amidst positive economic developments and hot Core PCE inflation from the US which made the market’s discount a higher likelihood of the Federal Reserve (Fed) hiking in the next meeting in June. On the data front last week Australian Retail Sales failed to meet expectations, remaining unchanged from March. This lackluster performance reflects the challenges faced by consumers due to the impact of rising interest rates and persistent inflation. With retail turnover falling short of the anticipated 0.2% increase, it indicates a period of stagnation in consumer spending over the past six months. NZD/AUD remained under pressure into the weekly close with the pairing closing near 0.9280 marking a sharp fall from 0.9450 levels from before the RBNZ’s Monetary Policy Statement last Wednesday.
Looking ahead this week and on Tuesday the Australian Bureau of Statistics will release the monthly Building Approvals. On Wednesday Reserve Bank of Australia (RBA) RBA Governor Philip Lowe is due to testify before the Senate Economics Legislation Committee, in Canberra. As head of the central bank, which controls short term interest rates, he has more influence over the nation's currency value than any other person. On Wednesday we will also see the release of the Consumer Price Index (CPI). Consumer prices account for a majority of overall inflation. Inflation is important to currency valuation because rising prices lead the central bank to raise interest rates out of respect for their inflation containment mandate. On Thursday we will see the release of the Australian quarterly Private Capital Expenditure and Index of Commodity Prices.

Key Movers

US President Joe Biden and House Republican Speaker Kevin McCarthy on Saturday reached an agreement in principle to lift the debt ceiling that would trim some US federal spending. The “agreement in principle” clinched by House Republicans and the White House late Saturday was the culmination of mad-dash negotiations over the past week that regularly stretched late into the night. The agreement which would raise the debt ceiling for two years, freeze spending on domestic programs. US Treasury Secretary Janet Yellen spoke on Friday and extended the deadline for raising the federal debt limit, saying the government could default on its debt as early as June 5 without increasing the country's $31.4 trillion debt ceiling.
On the data front Inflation in the US, as measured by the change in Personal Consumption Expenditures (PCE) Price Index, rose to 4.4% on a yearly basis in April from 4.2% in March, the US Bureau of Economic Analysis reported on Friday. This reading came in higher than the market expectation of 3.9%. The increase in the annual Core PCE Price Index, the Federal Reserve's preferred gauge of inflation, edged higher to 4.7% from 4.6% in the same period, compared to analysts' forecast of 4.6%. On a monthly basis, Core PCE inflation and PCE inflation both rose 0.4%.

Expected Ranges

  • AUD/USD: 0.6400 - 0.6600 ▼
  • AUD/EUR: 0.5950 - 0.6150 ▼
  • GBP/AUD: 1.8800 - 1.9000 ▲
  • AUD/NZD: 1.0650 - 1.0850 ▲
  • AUD/CAD: 0.8750 - 0.8950 ▲