Range bound; what will drive a break
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Daily Currency Update
The Australian dollar benefited from a softer US dollar Monday, edging back above US$0.6650. Softer US equities and weaker US treasury yields drove the USD lower against most counterparts, allowing the AUD to edge back toward the upper end of recent ranges. The AUD remains well and truly entrenched within a narrow trading handle, bouncing between US$0.66 and US$0.6680.While sentiment toward the USD is shifting as US economic exceptionalism may be waning, lacklustre global growth and a weakening Chinese yuan act as headwinds preventing an extended AUD rally. The PBOC again set a lower CNY fix, this being the fourth consecutive weaker fix, acknowledging the widening gap in US and Chinese yields. With the USD trading above 7.26 last week an extended move toward 7.30 could weigh on the AUD and force a test of supports at US$0.6580.
Our attention today turns to Westpac consumer confidence data. We expect a contraction in May, with the survey signalling more negativity in spending patterns and a deteriorating real income backdrop. It will be interesting to see whether tax cuts promised in the new fiscal year help improve sentiment through the back end of 2024.
Key Movers
Price action across major currencies was largely subdued through trade on Monday, yet there were still clear winners and losers to start the week. The euro and GBP both edged higher buoyed by a contraction in French Political risk. Comments from National Rally party leader Bardella helped alleviate fears a far-right win would undermine the French economy. Bardella sought to convince voters that they are ready to bring the country's budget and economy back to reason.European yields rallied, led by France's CAC 40 up over 1%, while Germany’s DAC rallied 0.9% and the euro finished above 1.0730, up 0.4%. With Europe on the front foot, US equities retreated led by Nvidia and a broad IT pullback. The S&P 500 and Nasdaq both closed lower, while US yields closed down 1% forcing the DXY index to shift lower to start the week.
While lower against the euro, pound and antipodean currencies, the USD continues to close in on 160 against the yen. The likelihood of interventions is again increasing after the Bank of Japan failed to provide any guidance as to the timing and trajectory of quantitative easing.
Our attention today turns to commentary from ECB officials, Canadian CPI inflation data and US manufacturing and consumer confidence data.
Expected Ranges
- AUD/USD: 0.6580 - 0.6680 ▲
- AUD/EUR: 0.6150 - 0.6230 ▼
- GBP/AUD: 1.8900 - 1.9200 ▲
- AUD/NZD: 1.0820 - 1.0920 ▲
- AUD/CAD: 0.9050 - 0.9150 ▼