Home Daily Commentaries Aussie dollar unable to hold onto gains won post hotter inflation report as risk sentiment falters

Aussie dollar unable to hold onto gains won post hotter inflation report as risk sentiment falters

Matt Richardson
Written by
Matt Richardson

Matt Richardson

OFXpert

Matt provides expertise in currency risk management to his clients, drawing from his 14 years of experience in foreign exchange.

| Thursday 30 May, 2024

Daily Currency Update

The Australian dollar tracked lower through trade on Wednesday amid a broad shift in risk appetite and an uptick in global bond yields. The Aussie dollar enjoyed a boost through the domestic session after CPI inflation data for April printed above expectations at 3.6% year on year versus market estimates of a retracement to 3.4%. While there were some seasonal anomalies in the headline print, core CPI measures also printed stronger than anticipated, suggesting inflation pressures remain persistent, dousing calls for the RBA to cut rates this year. Having touched intraday highs at US$0.6666, the AUD then retreated through overnight trade. A weaker Chinese yuan weighed on the AUD as a proxy after the People's Bank of China set the lowest fixing for 2024 in the face of sustained USD resilience. With the AUD suddenly on the back foot, an uptick in global bond yields led by German bunds following hooter than expected German inflation helps sap market demand for risk and drive the AUD toward overnight lows just north of US$0.66. The AUD opens this morning at US$0.6610 and our attention now turns to domestic private Capex numbers, Eurozone employment data and US GDP numbers ahead of tomorrow’s all-important US PCE inflation print.

Key Movers

The US dollar advanced against all G10 counterparts through trade on Wednesday buoyed by higher US treasury yields and a shift in risk sentiment. The DXY index closed up 0.5% for the day as the antipodean and Scandinavian currencies led losses while the Japanese yen and Swiss franc outperformed amid risk-off demand. Another soft US treasury auction added further fuel to treasury yield gains, while hotter-than-expected German CPI data helped to drive EU yields upward, squeezing equities and risk assets as markets prepare for an elongated period of elevated interest rates. German CPI rose 2.8% year on year up four-tenths of a percent on last month and above median estimates. With inflation pressures showing little signs of stalling our focus turns to broader eurozone inflation numbers ahead of the ECB policy meeting next week. Markets have largely priced in a 25-basis point rate cut, however, the hotter-than-expected inflation read could push back expectations for future rate adjustment and force investors to reconsider the timing and trajectory of monetary policy change. Our attention now turns to today's Eurozone employment data and US GDP numbers.

Expected Ranges

  • AUD/USD: 0.6580 - 0.6680 ▼
  • AUD/EUR: 0.6080 - 0.6150 ▼
  • GBP/AUD: 1.9100 - 1.9300 ▲
  • AUD/NZD: 1.0780 - 1.0850 ▼
  • AUD/CAD: 0.9000 - 0.9100 ▼

Written by

Matt Richardson

OFXpert

As a Senior Corporate Client Manager, Matt provides expertise in currency risk management to his clients, drawing from his 14 years of experience in foreign exchange. Matt has clients who he has been working with for over a decade, a testament to his knowledge and dedication in the field. Matt is also a regular contributor on Ausbiz, offering clear and precise updates on currency market trends, showcasing his ability to interpret complex financial data into actionable insights.

View previous day