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Aussie dollar trades below 0.73 U.S. cents

Monday 14 March, 2022

Daily Currency Update

The Australian dollar closed the week holding just below the 0.7300 threshold. Last week we saw the commodity-linked currency reach a fresh high of 0.7440 against the greenback before retreating. Financial markets were once again dependent on headlines related to the Russian and Ukraine situation. Treasurer Josh Frydenberg last week warned Australians to brace for higher interest rates while claiming the Coalition government is best placed to help people cope with the rising cost of petrol, food and mortgages. With the federal budget due to be handed down in just over two weeks, Mr. Frydenberg promised “we will not be increasing taxes in this budget” and that the government would rely on economic growth to bring down Australia’s booming budget deficit over time. Looking ahead this week and on Tuesday we will see the release of the Monetary Policy Meeting Minutes which provide a detailed record of the RBA Reserve Bank Board's most recent meeting, providing in-depth insights into the economic conditions that influenced their decision on where to set interest rates. We will also see the release of House Price Index (HPI) a leading indicator of the housing industry's health because rising house prices attract investors and spur industry activity.  On Thursday all eyes will be on Australian Unemployment Rate figures released by the Australian Bureau of Statistics which forecast a fall in unemployment to 4.1% whilst adding roughly 40.3K new jobs.

Key Movers

Last week the United States reported its February Consumer Price Index which soared to 7.9% YoY as expected, but still a 40-year high. The headline reading came one week ahead of the US Federal Reserve’s monetary policy meeting. The central bank is expected to raise interest rates for the first time since 2018, and policymakers will likely hint at a faster pace of hikes in 2022. Geopolitical turmoil, rising commodity prices and tighter monetary policies are making the perfect combo for continued risk-off trading, which is benefiting the greenback. The USD experienced broad-based strength on Friday, appreciating against all the G10 currencies except the CAD.  The Canadian dollar was the star performer in currency markets on Friday, appreciating 0.3, after a super strong Canadian labour market report. Employment growth was almost three times expectations while the unemployment rate fell a whole 1%, to 5.5%, near its pre-Covid lows. Bank of Canada tightening expectations were ratcheted higher after the report, with the market moving to price a 65% chance of a 50bps rate increase at the next meeting in April and the 2-year bond rate surging 11bps. Looking ahead this week in the United States and the focus will remain on inflation and the central bank’s reaction to it, and the latest update on Retail Sales.

Expected Ranges

  • AUD/USD: 0.7150 - 0.7350 ▼
  • AUD/EUR: 0.6550 - 0.6750 ▲
  • GBP/AUD: 1.7750 - 1.7950 ▼
  • AUD/NZD: 1.0550 - 1.0750 ▲
  • AUD/CAD: 0.9150 - 0.9350 ▼