Another range bound trading day for the AUD
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Daily Currency Update
The Australian dollar was again hemmed between support and resistance, bouncing between US$0.6630 and US$0.6670 as investors appear content in sidelining major bets until a clearer global monetary policy path emerges. Markets largely ignored the RBA minutes for the June meeting with no new insights proffered. Instead, a decline in US treasury yields led by comments from Fed Chair Jerome Powell, helped the AUD climb to intraday highs at US$0.6670. Powell noted recent US data releases suggest inflation is back on track and a continued easing of price pressures should allow the FOMC to lower interest rates. With treasury yields falling and the USD giving up gain won through Monday, the AUD again tested resistance. Investors appear reluctant in pushing through regional headwinds ahead of a clear path to US rate cuts. Our attentions are affixed to US non-farm payroll numbers as a critical marker in guiding Fed policy. The US labour market continues to show remarkable resilience and is affording the Fed time to consider policy moves. A softening in employment conditions may act as a catalyst to bring forward rate cuts and propel the AUD toward US$0.67.Key Movers
Price action across majors has been largely subdued to start the week, with the USD retracing gains won on Monday following comments from Fed Chair Jerome Powell. Powell suggested inflation was moving toward the Fed targets and “quite a bit of progress has been made”. While he declined to give guidance on the timing of rate cuts the market is preparing for an easing in financial conditions before November. Powell also noted the unsustainable trajectory of US national debt, noting it is a top issue for politicians. The comments forced US yields lower as the dollar gave up ground against most counterparts. While the euro is little changed, the GBP edged higher, up .3% ahead of the UK Election on Thursday. With Labour expected to win and stabilise the economy, markets are pricing for less domestic volatility in the UK, potentially, if coupled with a sustained decline in inflation pressures, opening the door for the GBP to strengthen. The CAD also outperformed up near half a percent. There is no obvious catalyst for the upturn outside a rally in domestic yields and it seems markets are merely correcting earlier weakness.Our attentions this week remain with the UK election and US non-farm payroll numbers as the two big ticket items driving direction.
Expected Ranges
- AUD/USD: 0.6600 - 0.6680 ▲
- AUD/EUR: 0.6150 - 0.6250 ▲
- GBP/AUD: 1.8900 - 1.9100 ▲
- AUD/NZD: 1.0900 - 1.1000 ▼
- AUD/CAD: 0.9080 - 0.9180 ▼