AUD driven lower after RBA policy meeting
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Daily Currency Update
The Australian dollar underperformed Tuesday as markets reacted to the RBA’s policy meeting and rate adjustment. While the 25-basis point cut was widely expected RBA governor Bullock's admission that a 50-point cut was not discussed. The prospect of a larger-than-anticipated cut, coupled with a quicker-than-anticipated easing in underlying inflation pressures prompted markets to revise expectations for the next RBA policy meeting. Analysts had priced just a 9 basis point adjustment at the next meeting, suggesting a division of opinions as to whether policy makers would move to cut again or leave rates on hold. After today markets are pricing another 25-point cut in July followed by cuts in August and November. Having tracked sideways leading into the meeting, the AUD quickly gave up US$0.6450, sliding below US$0.64 to mark intraday lows at US$0.6395 before finding support.Overnight data was confined to Canadian inflation numbers and with little headline newsflow there was little to assist the AUD in making an offshore recovery. Another quiet data calendar today should see AUD track within a confined range with trade and geopolitical headlines driving risk sentiment.
Key Movers
Price action across majors was largely tepid Tuesday amid an absence of headline newsflow and top-tier data. An uptick across European and Asian equity indices and a steepening in government bond yield curves helped drive gains for the euro, CHF, JPY, and GBP. In contrast US equities were little changed with markets moving to consolidate gains won through the last month prompting broader USD softness and a 0.4% depreciation in the DXY dollar index. The Canadian dollar also gained after a stronger-than-expected inflation print. Core inflation reached its highest level in more than 12 months prompting markets to pare back expectations for Bank of Canada rate cuts through year end.UK CPI inflation data headlines another largely quiet macroeconomic docket while geopolitical headlines and US trade negotiations continue to drive the underlying risk narrative.
Expected Ranges
- AUD/USD: 0.6350 - 0.6500 ▼
- AUD/EUR: 0.5650 - 0.5750 ▼
- GBP/AUD: 2.0650 - 2.1050 ▲
- AUD/NZD: 1.0800 - 1.0900 ▼
- AUD/CAD: 0.8880 - 0.9020 ▼