Aussie dollar holds above US$0.65
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Daily Currency Update
The Australian dollar is slightly stronger this morning when valued against the Greenback currently trading at 0.6542 at the time of writing. In Friday's session, the Australian dollar slightly recovered against the USD, as AUD/USD rebounded to 0.6550 level. The Australian dollar (AUD) has been facing an intense sell-off for more than a week as deepening worries over the global growth outlook have dampened iron ore prices. Australia caters to more than half of global iron-ore demand, and a sharp decline in its prices has raised concerns over foreign flows to the nation. The AUD/JPY pair showed a minor recovery, rising by 0.15% to end at 100.79. Despite this, the overall control of sellers remains, as the pair closes on a 4.30% losing week. Looking ahead this week on the data front and on Tuesday we will see the release of the latest monthly Building Approvals. On Wednesday all eyes will be on the Australian Bureau of Statistics quarterly Consumer Price Index (CPI). Consumer prices account for a majority of overall inflation. Inflation is important to currency valuation because rising prices lead the central bank to raise interest rates out of respect for their inflation containment mandate. Despite the visible vulnerability in the Australian economy, the Reserve Bank of Australia (RBA) delays its rate cuts due to persistently high inflation. This stance could potentially limit further depreciation of the AUD. On Wednesday we will also see the latest monthly Retail Sales figures which is the primary gauge of consumer spending, which accounts for the majority of overall economic activity. On Thursday we will see the release of the Goods Trade Balance. Export demand and currency demand are directly linked because foreigners must buy the domestic currency to pay for the nation's exports. On Friday we will see the release of the Producer Price Index (PPI) which is also a leading indicator of consumer inflation.Key Movers
U.S. prices increased moderately in June as the declining cost of goods tempered a rise in the cost of services, underscoring an improving inflation environment that could position the Federal Reserve to begin cutting interest rates in September. The report from the Commerce Department on Friday also showed consumer spending slowed a bit last month. Signs of easing price pressures and a cooling labor market could boost the confidence of Fed officials that inflation is moving toward the U.S. central bank's 2% target. The Fed will hold its next policy meeting on July 30-31. The personal consumption expenditures (PCE) price index nudged up 0.1% last month after being unchanged in May, the Commerce Department's Bureau of Economic Analysis reported. The increase in PCE inflation was in line with economists' expectations. Goods prices dropped 0.2% after falling 0.4% in May. Prices for motor vehicles and parts declined 0.6%. Furnishings and durable household equipment prices dropped for a third straight month, but the cost of other long-lasting manufactured goods rebounded 1.8%.The Bank of England's first interest rate cut since 2020 hangs in the balance on Monday, with greater uncertainty than usual as key policymakers have not spoken publicly for more than two months due to rules in the run-up to July 4's election. Interest rate futures show a 50% chance of a quarter-point rate cut on Aug. 1. And while most economists in a Reuters poll still expect a cut, many would not be too surprised if the BoE instead waited until its following meeting on Sept. 19. Last month, the BoE's Monetary Policy Committee voted 7-2 to keep rates on hold, but minutes of the decision recorded that it had been a "finely balanced" decision for some of the policymakers who had not voted for a cut. Consumer price inflation has been at the BoE's 2% target in May and June, down from 6.7% when the BoE last raised rates in August 2023 and lower than in the United States or the euro zone, where the European Central Bank cut rates in June.
Expected Ranges
- AUD/USD: 0.6450 - 0.6650 ▼
- AUD/EUR: 0.5900 - 0.6100 ▼
- GBP/AUD: 1.9500 - 1.9700 ▲
- AUD/NZD: 1.1000 - 1.1200 ▲
- AUD/CAD: 0.8950 - 0.9150 ▼