AUD closes in on new yearly low

Daily Currency Update

The Australian dollar fell through trade on Wednesday giving up US$0.69 amid souring risk sentiment and a broadly stronger US dollar. Having opened near US$0.70 the AUD fell steadily through the domestic session as risk demand faltered and investors appeared reluctant in extending gains amid a backdrop of higher global rates and near-term monetary policy uncertainty. Reserve Bank governor Philip Lowe spoke at a senate hearing and offered little new guidance, instead reiterating the banks hawkish commitment to controlling inflation. With little else of note on the domestic ticket attentions turned to the keenly anticipated US retail sales data update. Consumer spending jumped 3% in January, suggesting consumer demand in the US remains strong. The upturn in activity surpassed consensus estimates and helped drive GDP expectations, bond yields and rate estimates higher. Sustained strength across the labour market, key services and consumer demand have elevated expectations for Fed policy as market adjust forecasts expecting rates to remain elevated for longer. The AUD slid below US$0.69 touching intraday lows south of US$0.6870 before finding support. Down 1.5% on the day the AUD has found some backing and opens this morning right on US$0.69.

Our attentions turn now to local labour market data where we anticipate steady jobs growth and an unemployment rate of 3.5%. A robust read will underpin expectations for more hawkish RBA policy while any signs of fragility could see the currency test year to date lows and break toward US$0.6850.