AUD buoyed by Fed decision to leave rates on hold
Daily Currency Update
The Australian dollar climbed through trade on Wednesday, moving back toward US$0.64, after the Federal Reserve (Fed) opted to leave rates on hold. With most analysts expecting the Fed would refrain from tightening rates again our attentions were squarely affixed to the accompanying policy statement and rate update. While Federal Reserve Chair, Jerome Powell and the FOMC offered little in the way of new guidance, two key changes to the statement helped the AUD push toward fresh intraday highs. While upgrading the growth outlook, the Fed also pointed to tighter financial and credit conditions as a key market for guiding future policy. While above potential growth and stubborn inflation warrant a hike the FOMC is keen to proceed carefully, suggesting tighter conditions may be sufficient in controlling further price pressures. US treasury yields moved lower allowing the AUD to outperform its major counterparts. With the RBNZ, Bank of Canada, Bank of England and ECB all tipped to have reached the end of their tightening cycles, the hawkish undercurrent driving calls for an AUD rate hike has added support to the AUD, particularly against key crosses. Having touched intraday highs to US$.64, our attentions turn to the Bank of England policy update this evening and US non-farm payrolls Friday as key markers shaping direction into the weekend.Key Movers
With the Federal Reserve opting to leave rates on hold and offering little new in the way of forward guidance, price action across major currencies has been largely muted. The DXY index is little changed, though the USD has faced some downside pressure as US treasury yields retreated. While scrounging meagre gains against both the euro and GBP the dollar gave up ground against the AUD and JPY on the lower yield backdrop. Verbal intervention from the Japanese Ministry of Finance (MoF) helped the yen to recover losses suffered in the wake of Tuesday’s Bank of Japan (BoJ) policy update. Having maintained an ultra-easy monetary policy program, the BoJ condemned the yen to further weakness forcing officials to comment. Top MoF policymakers came out on Wednesday to state, “...we’re very concerned about one-sided, sudden moves in currencies…we are on standby.” The comments were enough to spook investors and while the BoJ and MoF’s actions continue to work against each other the Yen found support and the USD slipped back below 151 to 150.82.Our attention turns now to US non-farm payroll on Friday and the Bank of England (BoE) policy update tonight. We expect the BoE will leave rates on hold with less than a 5% chance of a hike priced in.
Expected Ranges
- AUD/USD: 0.6270 - 0.6420 ▲
- AUD/EUR: 0.5980 - 0.6080 ▲
- GBP/AUD: 1.9000 - 1.9400 ▼
- AUD/NZD: 1.0880 - 1.0980 ▲
- AUD/CAD: 0.8850 - 0.8920 ▲