AUD on the backfoot as Fed officials consider rate hike
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Daily Currency Update
The AUD underperformed when valued against G10 majors, sliding back below US$0.6650 having given up three-quarters of a percent amid broad-based US dollar gains. The Federal Reserves May Meeting Minutes were more hawkish than markets anticipated, highlighting the uncertainty of policymakers about the near-term inflation risk and subsequent policy outlook. Equities and risk assets tracked lower as US treasury yields enjoyed modest gains. With markets adjusting expectations for a Fed rate cut in September the AUD slipped off intraday highs just north of US$0.6681, tumbling through US$0.6650 and marking session lows at US$0.6609 before finding support.With little of note on the domestic docket, our attentions turn to PMI data for the Eurozone, UK and Japan. EU wage data, US jobless claims and commentary from key central bank speakers could also drive direction through the overnight session.
Key Movers
There's been plenty of price action through the last 24 hours with the USD DXY index edging higher on the heels of the FOMC meeting minutes and the GBP Spiking following stronger-than-expected inflation data.The dollar found support following the release of the Federal Reserve May Meeting Minutes, which showed several policymakers held a penchant to tighten policy further, while others noted a higher level of uncertainty surrounding the appropriate level of restrictiveness. Yields rallied on the back of the meeting minutes release and pricing for a September rate cut faded as markets adjust expectations and price in higher rates for longer. While the Euro gave up 0.3% and slid below 1.0850, the British Pound performed well, spiking 0.4% after UK inflation failed to fall as far as markets expected. While a reduction in energy prices helped in leading a decline in year-on-year inflation services, inflation remains stubbornly high and printed stronger than expected. With Headline CPI writing in at 2.3%, market pricing for a June rate cut fell to just 12%, down from 50% before the print. Markets are now looking to August as the key meeting for a Bank of England rate amendment.
Our attention turns now to a slew of offshore PMI data prints and US jobless claims for direction through Thursday.
Expected Ranges
- AUD/USD: 0.6580 - 0.6700 ▼
- AUD/EUR: 0.6050 - 0.6150 ▼
- GBP/AUD: 1.9000 - 1.9400 ▲
- AUD/NZD: 1.0820 - 1.0920 ▼
- AUD/CAD: 0.9000 - 0.9100 ▼