Depreciating Chinese yuan acts as headwind to AUD upside
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Daily Currency Update
The Australian dollar underperformed through trade on Thursday following a cautious statement from RBA deputy Governor Andrew Hauser. The AUD gave up gains won in the wake of the hotter than anticipated May CPI print, sliding back below US$0.6670 after Hauser affirmed the importance of a whole raft of data sets between now and August in shaping policy makers decisions on rates. While inflation remains stubbornly sticky, the Bank is assessing all areas of the economy to determine whether a rate hike is appropriate. With pricing for a rate hike tempered, Australian yields fell and the AUD slid back below US$0.6650, unable to muster support despite a softer USD. Further depreciation in the Chinese yuan and a break above 7.30 for the CNH continue to act as a drag on AUD upside.Our attentions turn now to US PCE data tonight, while the First Trump v Biden presidential debate today could spark volatility.
Key Movers
Price action among majors was mixed through Thursday, as US treasury yields relinquished some of Wednesday's upside, affording room for the euro and GBP to eke out gains while antipodean units faltered. The days biggest loser however was the Swedish kroner, sliding after the Riksbank signaled it intended to gut rates three more times before the year is out. The yen joined the SEK and other underperformers unable to mount any upward momentum despite the correction in US yields. The USD again tested resistance at 160.80 before edging back toward 160.50.Our attentions turn now to a packed agenda to close the week. The First Trump v Biden Elections start at 11am AEST and will likely run for 90 minutes, which should provide some valuable entertainment and may distract from the day's big ticket item, the OPCE deflator report. We expect to see softer inflation signals, supporting calls for the FOMC to bring forward rate cuts. A surprise to the upside could allow the USD to mount an upward run into the weekend. Also on the docket, Tokyo CPI numbers and preliminary EU inflation numbers.
Expected Ranges
- AUD/USD: 0.65800 - 0.6700 ▼
- AUD/EUR: 0.6180 - 0.6250 ▼
- GBP/AUD: 1.8900 - 1.9100 ▲
- AUD/NZD: 1.0880 - 1.0950 ▲
- AUD/CAD: 0.9050 - 0.9150 ▼