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AUD steady ahead of all-important US inflation print

Wednesday 12 January, 2022

Daily Currency Update

The Australian dollar advanced through trade on Tuesday, extending back above 0.72 US cents amid an uptick across commodities and commodity currencies. Oil sensitive units led gains with the CAD and NOK outpacing major counterparts amid concerns US stockpiles were declining. The uptick in demand for commodities, coupled with a surge in domestic retail sales allowed the AUD to break resistance at 0.7190.  With US treasury yields flat, the AUD capitalised on broad-based US dollar weakness overnight extending toward intraday highs at 0.7215. The AUD remains firmly range-bound as our attentions shift toward key US inflation data this evening. Price pressures are now the primary driver behind Fed policy expectations and another robust print will all but guarantee a March rate hike and amplify the likelihood of four rate adjustments through 2022. The USD has not enjoyed the same upward momentum we expected through the start of the year yet remains well-supported by higher yields and elevated monetary policy expectations. A strong read could see the AUD test a break back below 0.71 US cents.

Key Movers

The CAD and NOK led gains across G-10 currencies through trade on Tuesday, emboldened by an uptick in oil prices. A general push toward commodity led units prompted USD weakness, forcing the dollar index back toward 95.50 down some 0.4% on the day and off highs above 96. While the USD has not enjoyed the same upward momentum, as we forecasted at the end of 2021, it remains well-supported by the promise of accelerated monetary policy and higher treasury yields. Our focus today turns to an all-important CPI inflation print. Controlling price pressures is now a key mandate for the Fed and another robust print will all but guarantee a March rate hike. With policymakers keen on reducing balance sheet pressures, expectations for a fourth-rate hike continue to grow. An uptick in year-on-year price growth beyond 7% could help fuel another dollar run. A break above 96.20 could signal a push toward 97, adding pressure on key counterparts like the euro, yen and pound.

Expected Ranges

  • AUD/USD: 0.7070 - 0.7270 ▲
  • AUD/EUR: 0.6280 - 0.6390 ▲
  • GBP/AUD: 1.8820 - 1.9050 ▼
  • AUD/NZD: 1.0590 - 1.0650 ▲
  • AUD/CAD: 0.9020 - 0.9120 ▼