AUD range-bound as markets turn eye to key US labour market update
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Daily Currency Update
Price action was muted through trade on Monday and the AUD remains firmly entrenched within a narrow handle. In the absence of meaningful domestic data, our attention turned offshore. While US macro indicators softened, US treasury yields rallied, bolstering demand for the USD. Sustained yen and yuan softness continue to act as headwinds preventing AUD performance and the AUD slipped off highs above US$0.6670 to dip below US$0.6650.Our attention turns now to the RBA minutes for June. We are keenly attuned to commentary around rate hikes and the scale and scope of debate supporting one final tightening of the screw. Officials have debated hiking rates at the last two policy meetings and with the recent inflation surprise a hawkish summary could help push the AUD back toward the top end of recent ranges.
Key Movers
The US dollar firmed through trade on Monday, buoyed by an extended uptick in US treasury yields, while the euro outperformed amid diluted fears surrounding the French Election. USD strength was driven primarily by ongoing Japanese yen weakness, breaking above 161 to mark fresh multi-year highs at 161.41.Ongoing strength across treasury yields continues to plague the yen as the Bank of Japan refuses to be drawn on adjusting yield curve controls and monetary policy conditions. The market seems intent on testing official's resolve and willingness to intervene and protect the yen.
The euro advanced back toward 1.0750, marking highs at 1.0741, after round one of the French Election. While disastrous for Macron, it is now unlikely that Marine Le Penn’s far-right National Rally party will garner enough votes to win an outright majority.
A reduction in the risk premia coupled with commentary from ECB officials, wherein they suggested there is not yet enough evidence to suggest the fight against inflation has been won. European yields rallied, while rate expectations tempered as markets price in one more ECB rate cut into year-end.
Our attention turns now to the RBA minutes, more ECB commentary, European CPI data and US labour market data for Direction through trade on Tuesday.
Expected Ranges
- AUD/USD: 0.66 - 0.67 ▼
- AUD/EUR: 0.6150 - 0.6230 ▼
- GBP/AUD: 1.8800 - 1.9100 ▲
- AUD/NZD: 1.0920 - 1.1020 ▲
- AUD/CAD: 0.9100 - 0.9200 ▲