Aussie dollar unable to hold on to the previous week’s gains
Monday 15 May, 2023
Daily Currency UpdateThe Australian dollar is slightly weaker this morning when valued against the Greenback. The Aussie dollar fell on Friday after Wall Street's opening bell, as the US dollar strengthened and equity and commodity prices declined. The pair dropped to 0.6650, the lowest level in more than a week. Last week the Aussie dollar peaked at 0.6817, the highest level since February, before reversing its course losing more than a hundred pips. On Friday, it broke below the 0.6680 support area. The next relevant support zone is around 0.6635, below this attention will turn to 0.6600. To alleviate the bearish pressure, the Aussie needs to regain 0.6680 initially. The AUD/USD is currently trading at 0.6644 at the time of writing.
Looking ahead this week and on Tuesday the Reserve Bank of Australia will release the Monetary Policy Meeting Minutes 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. The RBA board raised its cash rate 25 basis points to 3.85% at its last monthly meeting two weeks ago despite the weaker-than-expected inflation. Evidence of rising inflation and "larger" wage increases prompted the bank's aggressive rate-hiking cycle in the first place, back in May last year. On Wednesday, we will learn if Australian workers' pay packets are growing at a rate that could force the Reserve Bank's hand in lifting interest rates for a 12th time. It's the release of the Australian Bureau of Statistics (ABS) Wage Price Index. And there's one number in that index that economists are sweating on.
Key MoversData released in the US on Friday saw Consumer sentiment has deteriorated in early May with the University of Michigan's (UoM) Consumer Confidence Index falling to 57.7 (preliminary) from 63.5 in April. This reading came in below the market expectation of 63. This likely reflects higher gas prices through April (which have now moderated) and lingering concerns about the banking stress. Consumer sentiment tumbled 9% amid renewed concerns about the trajectory of the economy, erasing over half of the gains achieved after the all-time historic low from last June. Inflation expectations for one year dropped from 4.6% to 4.5% in May. On the contrary, 5-year inflation expectations rose from 3.0% to 3.2%, the highest reading since 2011.
In the UK Britain's economy grew sluggishly in early 2023, better than the shallow recession once expected, but an unexpectedly sharp drop in output in March underscored how fragile its recovery remains. Gross domestic product (GDP) edged up 0.1% in the first three months of the year, official data showed on Friday, the same tepid pace as in the final quarter of 2022. But GDP in March alone dropped 0.3%, compared with poll forecasts for it to hold steady. While industrial output and construction grew, the much larger services sector dropped 0.4%, reflecting weak car sales and retail, hurt by unusually rainy weather and high inflation. The Pound Sterling (GBP) continues bleeding lower against the US Dollar (USD) following weakness triggered by last week's Bank of England (BoE) monetary policy meeting. Headline inflation in the UK is at 10.1% which is more than double the 4.9% reading in the US. US and UK Core inflation is more similar, however, with the US at 6.2% versus 5.5% in the UK. Nevertheless, it suggests the UK will have to continue raising rates after the Federal Reserve (Fed) has stopped.
- AUD/USD: 0.6550 - 0.6750 ▼
- AUD/EUR: 0.6000 - 0.6200 ▼
- GBP/AUD: 1.8600 - 1.8800 ▲
- AUD/NZD: 1.0600 - 1.0800 ▲
- AUD/CAD: 0.8900 - 0.9100 ▲