AUD steadies ahead of jam-packed macroeconomic agenda
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Daily Currency Update
The Australian dollar found support through trade on Monday, tracking within a narrow range, as markets square positions ahead of a busy macroeconomic agenda. The Australian dollar was hammered last week, plunging 1.7% as underwhelming China stimulus plans, softer commodity prices, US election uncertainty and a rapid unwinding of Japanese yen carry trades coalesced to foster a veritable perfect storm in which markets dumped the AUD.Having touched lows at US$0.6515 on Thursday, price action steadied through trade yesterday and the AUD bounced between US$0.6525 and US$0.6570. Our attention turns now to a packed macroeconomic calendar. Domestic Q2 CPI inflation data Wednesday headlines the local ticket. We expected inflation will have risen by 1% quarter on quarter while annualised CPI should print near 3.8%.
While pricing for a rate hike has faded, a print materially off consensus estimates should drive AUD volatility. An upside surprise will again drive calls for one last rate hike, while a softer-than-expected print will likely elevate hopes for a rate cut and force the RBA to join other major central banks in edging toward an easing bias.
With the Bank of Japan, Federal Reserve and Bank of England all set to conduct policy meetings and US non-farm payrolls closing out the week, there is ample scope for more wild moves through the week ahead.
Key Movers
When compared with the wild price action last week markets appeared content in treading water through trade on Monday, with most majors tracking within a narrow range. The AUD and NZD remained on the back foot amid lower commodity prices, while the euro underperformed on the day and the USD pushed back against last week's yen surge.The euro and Swiss franc were the day's underperformers amid reports EU officials were developing new trade strategies to deal with punitive tariffs that may be imposed should Donald Trump win re-election. With the potential for duties of 50% to be levied on imports, talk of a renewed trade war dampened demand for the single currency. With the GBP and JPY tracking a narrow range, our attention turns to Wednesday and the Bank of Japan policy meeting.
The BoJ is expected to offer a detailed plan for ending quantitative easing in what will be a major step to normalising monetary policy. With some analysts calling for officials to double down and raise interest rates, or at the very least hint toward a rate hike in the near term, yen pricing will likely track amid a wider range leading out of the meeting.
With the Bank of England and Fed meeting as well this week there is ample scope for elevated volatility through US non-farm payrolls and the weekly close on Friday.
Expected Ranges
- AUD/USD: 0.6480 - 0.6600 ▼
- AUD/EUR: 0.6000 - 0.6100 ▲
- GBP/AUD: 1.9550 - 1.9750 ▼
- AUD/NZD: 1.1080 - 1.1180 ▲
- AUD/CAD: 0.9020 - 0.9120 ▲