AUD range bound ahead of key inflation updates

Daily Currency Update

The Australian dollar opens this morning in much the same position as it started Tuesday, having maintained a narrow trading handle amid broader month-end rebalancing. With little of note on the days domestic docket the AUD drifted toward intraday lows just north of US$0.6705 before softer than anticipated US macroeconomic data helped provide a modicum of support, lifting the AUD toward session highs marginally above US$0.6750. All told the AUD was one of the worst performing major currencies through February and there were few signs yesterday the near-term trend will change. Fears monetary policy will remain restrictive for longer were exacerbated through February following a rebound in US economic activity and improvement in labour market conditions. With few signs global central banks will be afforded the conditions to loosen policy expectations, we imagine the AUD will continue to face near term headwinds through March.

Our attentions today turn to Q4 GDP data and monthly CPI numbers for January. With GDP expected to show a modest expansion our primary focus remains with inflation. With prices expected to sit 8% higher than this time last year there is ample scope to suggest the RBA will need to deliver multiple rate hikes through the months ahead.