Home Daily Commentaries New day, same old narrative. AUD well and truly range bound

New day, same old narrative. AUD well and truly range bound

Daily Currency Update

At the risk of sounding like a broken record, the Australian dollar was well contained through trade on Tuesday, tracking within a narrow 40-point range. Markets ignored local consumer sentiment data and instead looked offshore for direction. The Chinese yuan gave up ¥7.25 against the USD and with offshore spreads widening ongoing depreciation pressures are likely to remain in play, acting as a headwind pushing against the AUD upside. Having marked session highs of US$0.6673 the AUD retreated, extending losses on the back of a broadly stronger US dollar. With markets unwinding some of Monday’s US dollar downturn amid stronger US treasury yields the AUD slipped toward intraday lows at US$0.6626 before finding support and settling in the middle of the days trading range to open this morning just south of US$0.6650.
Our attention now turns to the May CPI inflation numbers. With the RBA’s tolerance for inflation upside narrow, a print above 3.8%y/y could drive calls for one final rate hike while a softening in price pressures may bring forward calls for a rate cut.

Key Movers

Another quiet day across currency markets with most majors trading within a narrow 0.2% band when measured back against the US dollar. The Canadian dollar was the day's big mover finding support following a stronger than expected CPI inflation print. May CPI numbers printed a year-on-year increase of 2.9%, up from 2.7% in April and 0.3% above market estimated. The surprise increase in inflation was driven by the service and health sectors and forced analysts to unwind bets for a July rate cut. Markets now estimate there is just a 1 in 5 chance the Bank of Canada cuts rates in July, instead of firming bets for a September rate adjustment. With Canadian yields rallying the Canadian dollar touched intraday highs at $US0.7330. The upturn was however short-lived and USD momentum forced a retracement and move back toward US$0.7315. While there was no headline US data on the docket ongoing mixed messaging from Fed officials and US data sets ensured the outlook around the timing and trajectory of US rate cuts remains clouded. Commentary from two key Fed officials was at loggerheads with Member Bowman suggesting a rate cut this year may be too soon and could incite a rebound in inflation and policy increase in the future, whereas Member Cook suggested that it will be appropriate to reduce rates at some point with the timing determined by how data evolves. The contrasting comments coupled with a downturn in consumer confidence and stronger labour market conditions perfectly illustrate the conundrum facing markets. The timing and pace of monetary policy change is still very much unknown and until a clear path emerges ranges across major currencies are likely to be well contained.

Expected Ranges

  • AUD/USD: 0.6600 - 0.6700 ▼
  • AUD/EUR: 0.6150 - 0.6230 ▲
  • GBP/AUD: 1.8900 - 1.9200 ▲
  • AUD/NZD: 1.0800 - 1.0920 ▼
  • AUD/CAD: 0.8980 - 0.9120 ▼

Written by

Matt Richardson


As a Senior Corporate Client Manager, Matt provides expertise in currency risk management to his clients, drawing from his 14 years of experience in foreign exchange. Matt has clients who he has been working with for over a decade, a testament to his knowledge and dedication in the field. Matt is also a regular contributor on Ausbiz, offering clear and precise updates on currency market trends, showcasing his ability to interpret complex financial data into actionable insights.