Home Daily Commentaries AUD unable to sustain break above US$0.67 amid elevated global inflation fears

AUD unable to sustain break above US$0.67 amid elevated global inflation fears

Daily Currency Update

The Australian dollar closed lower on Wednesday after being caught in the backwash of a broad risk-off move and weaker-than-anticipated Chinese trade data. Having tracked sideways through much of the domestic session and the early half of overnight trade, the AUD eyed a break above US$0.67 leading into the Bank of Canada monetary policy meeting. After touching intraday highs at US$0.6716, the AUD dropped sharply after the Bank of Canada surprised markets by lifting rates. Investors had priced in a 3rd consecutive month where interest rates would remain at 4.5%, and the decision to lift the underlying policy rate to 4.75% prompted a swift sell-off across equities and risk assets. The AUD slipped back below US$0.67 and US$0.6650 before finding support. Having bounced off intraday lows, the AUD traded flat into this morning’s open unable to extend gains amid further concerns surrounding China’s growth outlook. Trade data showed import and export activity contracted in May, elevating fears of a broader global slowdown and softening the domestic outlook. The Chinese Yuan continued its precipitous slide breaking 7.15 against the USD.

Our attentions now turn to US unemployment claims, which is the only real direction marker on the day's macroeconomic ticket.

Key Movers

The Canadian dollar has been the day's big mover, surging upward after the Bank of Canada (BoC) surprised markets by opting to lift rates by 25 basis points. After keeping rates steady for the last 2 months, policymakers caught investors off guard, lifting the policy rate from 4.5% to 4.75%. The BoC cited stronger than anticipated growth, a rebound in housing market activity, persistent demand across the economy and stubbornly high inflation pressures as key factors in influencing this month’s decision. The move triggered a sell-off across equities, bonds and risk assets and drove global rates higher into the daily close. The CAD strengthened a full cent following the decision while the JPY underperformed against a backdrop of higher global rates and the Euro and GBP traded flat. The USD found support in the risk-off move and higher rates backdrop edging upward on the day.

With little of note on the global macro ticket, our attentions turn to US unemployment claims ahead of key Chinese Inflation data Friday and next week's all-important FOMC interest rate update.

Expected Ranges

  • AUD/USD: 0.6580 - 0.6730 ▼
  • AUD/EUR: 0.6150 - 0.6250 ▼
  • GBP/AUD: 1.8520 - 1.8820 ▲
  • AUD/NZD: 1.0950 - 1.1080 ▲
  • AUD/CAD: 0.8850 - 0.9020 ▼