Home Daily Commentaries Aussie dollar rallies back above 68 US cents

Aussie dollar rallies back above 68 US cents

Tuesday 6 September, 2022

Daily Currency Update

The Australian dollar is slightly stronger this morning trading just above 68 US cents on modest USD weakness. The AUD/USD recovers some ground after recording fresh two-month lows during the last week, amid a negative market sentiment trading session, with US equities being closed in the observance of Labor day. The AUD/USD pair fell to 0.6772 on Monday despite mostly encouraging Australian data. The AIG Performance of Construction Index printed at 47.9 in August, improving from 45.3 in July but still indicating contraction in the sector. The August S&P Global Services PMI was upwardly revised from 49.6 to 50.2, while the Composite PMI was also revised to 47.9. Furthermore, TD Securities Inflation declined by 0.5% MoM in August, while the yearly figure contracted from 5.4% to 4.9%. Looking ahead today and the Australia’s economic docket will feature the Reserve bank of Australia (RBA) monetary policy decision, alongside the Current Account Balance, Exports, and the Real GDP. The Reserve Bank of Australia is expected to hike rates by 50 bps as they continue to fight to tame inflation. Analysts at TD Securities forecast a 50 bps rate hike on the thesis that the labor market remains tight, a solid consumer spending, and price pressures spread wide.

Key Movers

After fighting for the leadership of the Conservative Party for more than two months, Liz Truss has finally won the elections and has been elected as the next UK Prime Minister. Ms Truss won 57 per cent of the vote in the race to replace Boris Johnson as the Tory Party’s new leader. Compared to Rishi Sunak’s 42.6 per cent – a narrower than expected victory. Ms Truss inherits a perilous economic situation, with 40-year high inflation and a forecasted lengthy recession at the end of the year. The pound slumped to a near 40-year low against the US dollar on Monday, pushing the currency below pandemic levels to $US1.144 as markets confront UK’s economic prospects and energy crisis. Global stocks were falling Monday as acute fears of an energy crisis rose in Europe and the euro plunged to its lowest level in decades. The euro retreated to a two-decade low, while the dollar strengthened. Investors in the U.S. have a break from the latest tumult in markets for the Labor Day holiday. S&P 500SPX closed down –1.07%  futures rose 0.2% with tech stock-heavy Nasdaq COMP –1.31% while futures ended 0.3% higher. In Asia, Tokyo’s Nikkei 225 shed 0.1%, while Hong Kong’s Hang Seng Index retreated 1.2% as new Covid-19 restrictions in China spooked investors.

Expected Ranges

  • AUD/USD: 0.6700 - 0.6900 ▲
  • AUD/EUR: 0.6750 - 0.6950 ▲
  • GBP/AUD: 1.6850 - 1.7050 ▼
  • AUD/NZD: 1.1050 - 1.1250 ▼
  • AUD/CAD: 0.8850 - 0.9050 ▲