AUD marks two year high against NZD while holding firm against USD
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Daily Currency Update
The Australian dollar offered little to excite investors through trade on Wednesday, tracking within a well-defined range ahead of tonight’s critical US CPI inflation print. The AUD bounced between US$0.6732 and US$0.6752, opening this morning toward the upper end of the range as the USD moved lower overnight. While flat against most majors, the AUD did enjoy a significant boost against the NZD. The AUD lurched above 1.10 and even tested a break above 1.11, marking highs not seen since October 2022. New Zealand's lacklustre domestic economic outlook and a dovish RBNZ policy update forced a steep correction in the NZD, allowing the AUD to the June recovery.Our attentions turn now to tonight’s US CPI inflation print and jobless claims update. Inflation and labour market performance remain key pillars in influencing Fed policy. An extension in the disinflation narrative and a further softening in labour market conditions could be enough to firm up pricing for a September rate cut and propel the AUD toward US$0.68. That said, an inflation surprise and labour market resilience could give the Federal Reserve license to be patient and add a floor underneath near-term USD losses.
Key Movers
Price action across majors was well defined through Wednesday with the euro, yen and AUD all tracking within a narrow range. While the NZD underperformed following the RBNZ policy update, the GBP outperformed following commentary from the Bank of England's chief economist, Huw Pill. Pill warned of continued inflationary pressures and noted a rate cut as soon as August was unlikely. While Pill acknowledged a cut was needed before year-end there remained upside risks to inflation forcing policymakers to consider the timing and trajectory of rate adjustments. Pricing for an August adjustment was pared back and the GBP lurched back above 1.28 falling short of a break above 1.2850.Our attention turns now to US inflation data and jobless claims. We expect core CPI to show a 0.2% increase month on month, adding to the improvement in annual inflation pressures and affording the Fed confidence that inflation remains on track. Jobless claims will also be in focus as labour market performance remains key to guiding policy.
Expected Ranges
- AUD/USD: 0.6650 - 0.6800 ▲
- AUD/EUR: 0.6200 - 0.6300 ▼
- GBP/AUD: 1.8950 - 1.9150 ▲
- AUD/NZD: 1.1020 - 1.1120 ▲
- AUD/CAD: 0.9150 - 0.9250 ▼