Daily Currency Update
The Australian dollar tracked lower through trade on Thursday yet offered stout resilience in the face of hotter than anticipated US inflation data. With little note on the domestic ticket, the AUD tracked within a narrow range through the local session, bouncing between US$0.67 and US$0.6725, as investors sidelined major bets until after the all-important US December CPI report. The inflation report surprised to the upside with headline inflation rising more than forecasts, while core inflation proved stickier than predicted, muddying expectations for Fed policy and diluting hopes for a March rate cut from the Fed. With the USD advancing on the back of the data the AUD touched intraday lows at US$0.6650, before finding support and recouping losses through the latter hours of the overnight session. The AUD clawed its way back above US$0.6680 and opens this morning just short of US$0.67 at US$0.6690. Our attentions turn now to Chinese CPI and trade data, UK GDP numbers and more US inflation markers for direction into the weekly close.
Key Movers
All eyes were affixed to US inflation data on Thursday as relative monetary policy expectations continue to drive direction. The December report surprised to the upside with headline inflation printing above forecasts, while core CPI failed to contract as fast as investors anticipated. Headline inflation rose 0.3% through the month while core CPI was effectively unchanged, lifting the annual rate of inflation from 3.1% to 3.4%. The hotter than anticipated print affords Fed officials scope to push back against market estimates of a March rate cut and maintaining a tightening bias through the first half of the year. The USD advanced on the heels of the data forcing the euro back below 1.0950 and sterling toward 1.27, while the yen gave up 146 and intraday highs at 146.31. Having found support, the dollar failed to follow through and extend into the daily close with investors paring gains and ensuring price action across majors would close essentially flat on the day. The timing and trajectory of monetary policy remains key in shaping direction through Q1 and our attentions turn now to Chinese CPI and trade data, UK GDP numbers and more US inflation markers for direction into the weekly close.
Expected Ranges
- AUD/USD: 0.6650 - 0.6750 ▼
- AUD/EUR: 0.6050 - 0.6130 ▼
- GBP/AUD: 1.8900 - 1.9200 ▲
- AUD/NZD: 1.0700 - 1.0800 ▼
- AUD/CAD: 0.8920 - 0.9020 ▼