Home Daily Commentaries AUD slides under weight of USD rebound

AUD slides under weight of USD rebound

Daily Currency Update

The Australian dollar retreated through trade on Wednesday, retracing last week's gains amid a broader US dollar recovery. Markets continued to pare positions restoring oversold conditions and elevating the USD back toward levels seen prior to last week's sell-off. Having opened the day at US$0.6820, the AUD fell steadily through the domestic session and maintained the downward momentum overnight giving up US$.68 to mark intraday lows at US$0.6750 before finding support.

Our attentions now turn to local employment data. We anticipate employment growth of around 10,000 with the unemployment rate to remain flat at 3.6% but acknowledge there are risks of a downside miss with leading indicators clouding forecasts. A stronger print could cement calls for the RBA to raise rates in August, while a decline in employment growth and an uptick in unemployment may give policymakers license to extend the pause in the tightening cycle, weighing on the AUD.

Key Movers

The US dollar continued to make broad-based gains against major counterparts as markets sought to restore oversold conditions and consolidate positions. The DXY index jump half a per cent through trade on Wednesday as the GBP underperformed and the Euro gave up 1.12. The Great British Pound slipped back below 1.30 following a softer-than-anticipated UK CPI report. Both headline and core CPI printed below expectations for June, marking the first surprise to the downside in 5 months. Market estimates were way off with headline CPI falling almost a full percentage point to 7.9%, down from 8.7%. The sharp decline in inflation pressure (while still much too high) helped ease pressure on interest rates and allowed investors to scale back expectations for the Bank of England’s peak terminal rate. With rates and gilt yields moving lower, the GBP crumbled to intraday lows at 1.2875 before finding support and rebounding back toward 1.2950 leading into this morning’s open.

Our attentions now turn to US unemployment claims and mid-tier macro data for direction on the day.

Expected Ranges

  • AUD/USD: 0.6700 - 0.6850 ▼
  • AUD/EUR: 0.6000 - 0.6100 ▼
  • GBP/AUD: 1.8980 - 1.9220 ▼
  • AUD/NZD: 1.0780 - 1.0880 ▼
  • AUD/CAD: 0.8880 - 0.8980 ▼