AUD firmly range bound despite uptick in global growth estimates

Daily Currency Update

AUD - Australian DollarThe Australian dollar edged upward overnight after a largely subdued domestic session saw it test lows below 0.7680. The AUD drifted below 0.77 US cents through the afternoon after Asian markets came under pressure following commentary from the People's Bank of China. A PBoC advisor warned excessively low borrowing cost and an abundance of liquidity was fuelling a possible market bubble, forcing risk assets and equities lower as the Hang Seng, S&P 500 and ASX all edged lower. Having touched intraday lows at 0.7670, the AUD found support and surged toward intraday highs at 0.7750 after the IMF upgraded its growth forecast for 2021. The IMF expects the global economy will grow at a faster pace than it first anticipated, amending its year-end growth estimate to 5.5% as vaccines and fiscal stimulus help drive a return to normal. The upgrade helped fuel commodity led and pro-cyclical currencies with the AUD among the best performing major units on the day.With the AUD firmly range bound, our attentions now turn to Q4 CPI data and commentary from the Federal Reserve for direction through the day ahead. While we don’t anticipate any major surprise on domestic inflation, market estimates sit between 0.7% and 0.9% with core annualised inflation to come in around 1.1%. While an upside surprise might ease pressure on long-run, monetary policy expectations price pressures remain well short of the RBA’s 2-3% band. The Federal Reserve is expected to reiterate its commitment to accommodative monetary policy. Given inflation concerns have eased over recent weeks, we expect little from this month's Fed policy meeting; although, commentary around planned stimulus may offer some colour and steer direction.