AUD gives up 0.78 US cents despite climbing commodity prices

Daily Currency Update

AUD - Australian DollarThe Australian dollar changed tack through trade on Tuesday, giving up 0.78 US cents as investors appeared reluctant to extend beyond resistance amid a correction in risk demand. Having touched intraday highs at 0.7805 early in the domestic session, the AUD tracked steadily lower throughout the day marking lows at 0.7760 despite a surge in key commodity prices. With little data on hand to drive direction the AUD struggled to maintain the weeks early momentum, underperforming as US treasury yields rallied and risk appetite faltered amid concerns the impacts of the pandemic on the global economy are far from over. The situation in India continues to worsen as more than 350,000 new cases are found each day and the country's health care system is all but broken. With new variants detected there is a growing concern the current immunisation effort may be compromised should these variants spread around the world. Having found support on moves approaching 0.7750 our attentions turn to the macroeconomic docket and headline inflation data. While we expect little change year-on-year a quarterly uptick toward 0.9% would signal a lift in inflationary pressure and perhaps provide a catalyst to drive further appreciation through Q2, adding pressure on the RBA to bring forward the timeline of expectation surrounding a rate hike. We expect the AUD will remain range bound and track between 0.7630 and 0.7830 through the short term.