European turmoil eases as attentions turn to RBA
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Daily Currency Update
The Australian dollar underperformed through trade on Monday, yet remains well and truly entrenched within a familiar trading handle. Price action across major currencies was well contained Monday, with the euro outperforming and the AUD simply countering last week's gains, sliding back toward US$0.66, to bounce between US$0.66 and US$0.6650.A slew of China activity data sets did little to help prop up the AUD after slower-than-expected Industrial Production and an incremental upswing in retail sales offered little by way of instilling confidence in a broader Chinese economic recovery. Our attention turns now to the RBA and their latest policy update.
We expect policymakers will leave rates on hold and would be surprised if any shift in tone is proffered. The RBA is expected to maintain the status quo and stick with messaging suggesting they are “prepared for anything”. We expect little AUD reaction but are keenly attuned to any signal as to the timing and trajectory of monetary policy change.
Key Movers
Price action across currency markets cooled on Monday after last week’s European turmoil. French equities rebounded and French German bond spreads narrowed, allowing the euro to consolidate above 1.07, marking session highs at 1.0735. Marine Le Penn’s attempts to appeal to a wider voting cohort suggested she would seek to work with President Macron, suggesting her party's proposal would ease financial market concerns.While the euro rebounded, the USD advanced against the yen as US treasury yields continued their meteoric rise, extending beyond 157 to mark highs at 157.70. Higher yields worked against the yen, while the Bank of Japan’s (BoJ) unwillingness to commit to details surrounding bond-buying activity added more downward pressure on the already embattled currency.
BoJ officials refused to be drawn on reducing bond purchases, raising the likelihood of further intervention as the yen will likely face more targeted selling, at least until the next BoJ policy meeting. Our attention today turns to US retail sales, where we expect a modest activity uptick through May after the April slowdown.
Expected Ranges
- AUD/USD: 0.6580 - 0.6680 ▼
- AUD/EUR: 0.6100 - 0.6200 ▼
- GBP/AUD: 1.9100 - 1.9300 ▲
- AUD/NZD: 1.0720 - 1.0820 ▲
- AUD/CAD: 0.9000 - 0.9100 ▼