AUD forced lower amid US rebound and cooling bond market
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Daily Currency Update
The Australian dollar edged lower Thursday yet remains well and truly range bound. Having touched intraday highs just north of US$0.6450, the AUD tracked lower overnight sliding back toward US$0.64 amid a broad US dollar rebound. Stronger than anticipated US PMI data helped alleviate fears President Trumps economic and trade agenda will drive the economy toward recession. Risk sentiment improved and equities rallied, while treasury yields and bond markets cooled. The AUD again faltered in its push to break above the psychological US$0.65 barrier. The AUD has been well contained through the last 30 days bouncing between US$0.6350 and US$0.65, with ranges narrowing further in recent weeks to US$0.6380 to US$0.6450. It is clear there is a reluctance to extend AUD gains, while the cloud of uncertainty that is US trade policy looms large, yet the de-escalation in US/China trade tensions has helped add a floor beneath the currency.Our attentions today turn to Japanese CPI data while NZ, UK and Canadian retail sales data dominates the macroeconomic ticket.
Key Movers
The US dollar found support and retraced Wednesday’s downturn through trade on Thursday as equities traded higher and treasury yields cooled. Risk sentiment improved Thursday after US manufacturing and Services PMI reports both printed higher than anticipated, suggesting the economy is more resilient to the impacts of President Trump’s tariff agenda. Business sentiment improved in May following the de-escalation in US-China trade tensions. In contrast, euro area PMI’s pointed lower as activity slowed through May. Activity, particularly across service sectors, contracted suggesting ongoing uncertainty surrounding both euro area and US economic policy is weighing on sentiment. The soft print lifted calls for the ECB to lower rates again in June, forcing the euro back below 1.13 and toward intraday lows at 1.1258. In other news, the pound tracked sideways, matching US dollar gains, while the yen failed to keep pace with rising yields allowing the dollar a break back above 143 and 143.50.Our attentions turn now to Japan inflation data and retail sales reports for the UK and Canada, while trade and tariffs remain ongoing drivers of risk sentiment.
Expected Ranges
- AUD/USD: 0.6380 - 0.6500 ▼
- AUD/EUR: 0.5650 - 0.5750 ▼
- GBP/AUD: 2.0750 - 2.1050 ▲
- AUD/NZD: 1.0800 - 1.0900 ▲
- AUD/CAD: 0.8850 - 0.8950 ▼