AUD continues upward march breaking US$0.71
Friday 27 January, 2023
Daily Currency UpdateThe Australian dollar sought to consolidate Wednesday’s late upturn, maintaining a break above US$0.71 despite an uptick in US rates and dollar demand. Having lurched through resistance at US$0.7060 following Wednesday’s inflation surprise, the AUD pushed through US$0.71 through trade on Thursday, marking fresh highs just north of US$0.7140, a level not seen since August. With domestic markets closed for Australia Day the AUD offered little through the local session tracking between US$0.71 and US$0.7120. Having pushed higher ahead of key US data notes the AUD then slid toward session lows at US$0.7080. Stronger than anticipated US GDP growth and a downturn in weekly jobless claims helped fuel a short-term surge in US dollar demand. The AUD however quickly found support edging back toward US$0.7115 after closer analysis of headline numbers suggest a broadly weaker US economy. While headline data remains elevated, strength across a few key data points belies an otherwise soft underbelly allowing investors to double down on bets the Fed will be forced to moderate the pace of interest rate adjustment when it meets next week. With little of note’s on today’s domestic docket our attentions turn to Japanese CPI data ahead of next weeks run of central bank policy updates.
Key MoversThe Japanese yen was the weakest of majors through trade on Thursday giving up ground amid a backdrop of elevated global rates and expectations for an uptick in domestic inflation. The US dollar pushed through 130 to mark intraday highs at 130.61 before edging back toward 130.30 leading into this morning’s open. Stronger than anticipated US GDP data and a downturn in weekly jobless claims helped boost near-term demand for the USD. The world’s largest economy grew nearly 3% in the fourth quarter of 2022, spurred by sustained consumer demand. While consumer spending drove growth, a closer inspection of key US input indicators suggest the US economy is slowing down. Elevated consumer spending did slow when compared with activity through Q3 and action across retail and business investment plummeted. Inventory and building growth remained flat and while Jobless claims continued to run below expectations they do not reflect a string of recent layoffs. Continuing jobless claims are rising, suggesting it is taking longer now to find a job than it was 12 months ago, a sure sign cracks are appearing in the labour market. In other news, the Canadian dollar was the strongest of the majors as oil prices provided upside support following the Bank of Canada’s decision to take stock and pause its tightening cycle. With little of note on today’s ticket, outside Tokyo CPI data, our attentions turn to next weeks Fed and ECB policy updates.
- AUD/USD: 0.6980 - 0.7180 ▲
- AUD/EUR: 0.6480 - 0.6580 ▲
- GBP/AUD: 1.7350 - 1.7550 ▼
- AUD/NZD: 1.0890 - 1.0990 ▲
- AUD/CAD: 0.9450 - 0.9550 ▼