Dovish RBA Monetary Statement sends AUD below 74 US cents
Daily Currency Update
AUD - Australian Dollar
The Australian dollar faced headwinds, dropping 1.7% for the week as both the RBA and offshore central banks provided more dovish stances to potential interest rate hikes compared to market consensus. Opening at 0.7520 on Monday, a downward spiral to a weekly low of 0.7366 started on Melbourne Cup day as the release of the latest RBA rate statement remarked they would need to see wage growth materially higher for any rate hikes before 2024 and they remain patient. Furthermore, the Bank of England surprised markets with its decision to keep interest rates on hold when markets were pricing a 15-basis point rate hike.
The Australian dollar finished flat on Friday just below the 74 US cent handle after falling into the mid 0.73s following the release of the RBA Monetary Policy Statement who reiterated the need to see “inflation between 2 and 3% on a sustainable basis”. A final rally higher on Friday evening occurred before the final bell, clawing back losses for the AUD/USD as equity markets continued its march to record highs in the United States. The Nasdaq saw its seventh straight positive day, a stronger than expected jobs number in the United States was the catalyst.
Domestically this week, markets look to the latest employment print due for release on Thursday. The Australian dollar opens this morning at 0.7390. We expect support levels to hold onto moves approaching 0.7360, while any upward push will likely meet resistance at 0.7450.
Key Movers
The Great British pound was one of the biggest movers this week, shedding 1.4% on Thursday evening following the unexpected move by the Bank of England to keep interest rates on hold at 0.1%. GBP/USD steadied on Friday despite seeing an intraday low of 1.3424 before closing at 1.3494.The US Dollar Index (DXY) which measures several currencies against the greenback finished 0.12% lower at 94.22 despite a stronger than expected job print in the United States. A year high of 94.62 for the DXY was seen preceding the result as 531,000 jobs were added to the market. While the number beat forecasts, it is unlikely to shake out a dovish Federal Reserve as our attention turns to the latest inflation print in the United States due for release on Wednesday evening. Investors are eagerly watching the escalating issue of inflation across the globe and whether the higher number will force the hands of the Federal Reserve to start shifting its interest rate hikes earlier than expected. The CME FedWatch tool is currently projecting the first hike in mid-2022.
Elsewhere the EUR/USD was 0.12% higher at 1.1567 and USD/JPY finished 0.31% lower to 1.1339. This week several FOMC members are due to speak on Tuesday morning including Federal Reserve Chairman Jerome Powell. PPI and CPI figures are both due for release this week in the United States.
Expected Ranges
- AUD/USD: 0.7360 - 0.7450 ▼
- GBP/AUD: 1.8100 - 1.8420 ▼
- AUD/NZD: 1.0350 - 1.0430 ▼
- AUD/EUR: 0.6370 - 0.6420 ▼
- AUD/CAD: 0.9180 - 0.9250 ▼