Home Daily Commentaries AUD unable to capitalise on USD softness

AUD unable to capitalise on USD softness

Matt Richardson
Written by
Matt Richardson

Matt Richardson

OFXpert

Matt provides expertise in currency risk management to his clients, drawing from his 14 years of experience in foreign exchange.

| Thursday 22 May, 2025

Daily Currency Update

The Australian dollar tracked in a narrow range Wednesday, well contained despite sustained US dollar softness. Having opened at US$0.6420, the AUD crept toward intraday highs just short of US$0.6470, buoyed rising concern surrounding the US debt burden. US House Speaker, Mike Johnson, confirmed an agreement had been reached that would allow the House to press ahead in passing President Trump's flagship fiscal legislation. The bill includes significant tax cuts, raising economists fears for the state of the US fiscal positions. With the budget deficit growing and the debt burden increasing, signs of anxiety emerged across bond markets, prompting a risk off move away from equities and the US dollar. The AUD has fallen back below 0.57 euro cents and is testing supports at 0.5675, while sliding below 0.48 pence and 92.50 yen.

Our attentions turn now to European and US manufacturing and service PMI data and Germany’s IFO survey. We are looking for any signal the US tariff agenda has weighed on activity and inflation.

Key Movers

Price action across the majors was largely subdued on Wednesday amid a distinct lack of headline news and data. Talks between US President Trump and Russian President Vladimir Putin failed to yield a ceasefire in the Ukraine/Russo war, while rising concerns about US debt and a widening budget deficit sparked an extended risk off move. US treasury yields rose, and equities moved lower. With President Trump's flagship tax bill set to pass through the House of Representatives, there are growing fears for the stability of the US fiscal position, prompting anxiety across bond markets. The uncertainty weighed on the USD, allowing the euro to push back above 1.13 and the yen to force the dollar back below 143.50, while the pound marked a fresh 3-year high. Breaking above 1.3460. Sterling found support in a stronger than anticipated inflation report. Headline inflation climbed to 3.5%, its highest level in 12 months, while core inflation also rose, driven by an uptick in services inflation. The Bank of England (BoE) now expects inflation to peak in September at 3.7% and is closely monitoring for any further shift in price pressures. Markets pared bets for BoE rate cuts, pricing in just 38 basis points of cuts into the year-end, down from 42.

Our attentions now turn to European and US manufacturing and service PMI data and Germany’s IFO survey. We are looking for any signal the US tariff agenda has weighed on activity and inflation.

Expected Ranges

  • AUD/USD: 0.6350 - 0.6490 ▲
  • AUD/EUR: 0.5650 - 0.5750 ▼
  • GBP/AUD: 2.0650 - 2.0950 ▲
  • AUD/NZD: 1.0800 - 1.0900 ▲
  • AUD/CAD: 0.8880 - 0.8980 ▼

Written by

Matt Richardson

OFXpert

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.