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AUD - Australian dollar

The Australian dollar is slightly weaker this morning when valued against the Greenback trading at 0.7085 at the time of writing. The AUD/USD pair is seen in a narrow trading band on Friday consolidating its recent strong gains to the highest level since June 2022 with a 2% gain, supported by the stronger CPI print mid-week driving higher Australia-global rate spreads. Further upside could lift AUD/USD to the 0.7170 zone in the short-term horizon. Should the Aussie dollar break above January 26 high at 0.7142, we could see a breakout that will drive the major toward the round-level resistance of 0.7200. A breach of the latter will expose the asset for more upside toward June 3 high at 0.7283.
Looking ahead this week and on Tuesday we will see the release of monthly Retail Sales figures. This is the earliest look at vital consumer spending data and the primary gauge of consumer spending, which accounts for the majority of overall economic activity. On Wednesday we will see the release of the AIG Manufacturing Index a survey of about 200 manufacturers that asks respondents to rate the relative level of business conditions including employment, production, new orders, prices, supplier deliveries, and inventories. On Thursday all eyes will be on the Australian Bureau of Statistics' monthly Building Approvals and the National Australia Bank (NAB) Quarterly Business Confidence survey.

Key Movers

On Friday in the United States Core PCE Price Index came out at 0.3% MoM, slightly above 0.2% estimates and 0.2% previous MoM, and at 4.4% YoY from 4.7% previously. The slight gain in core inflation gave some marginal support to the US Dollar as it reduces the chances the Federal Reserve will turn dovish later in the year, but so far the currency has failed to follow through its initial lift to the upside. Markets still expect less aggressive policy tightening by the Federal Reserve, and are pricing in a smaller 25 bps Fed rate hike move in February, which keeps a lid on any meaningful upside for the Greenback. Friday's US economic calendar also featured the release of Pending Home Sales data and the revised Michigan Consumer Sentiment Index, both of which came in above estimates, with Home Sales registering an unexpected 2.5% rise in December versus the -0.9% expected. The focus now shifts to the outcome of a two-day FOMC monetary policy meeting, scheduled to be announced next Wednesday. Heading into the key event risk, the major is more likely to prolong its consolidative price move. The US S&P500 was up 0.25% on Friday, taking its weekly gain to 2.5% while the Nasdaq index rose just under 1% for a weekly gain of 4.3%, the latter supported by some support for tech stocks and Tesla’s 33% gain over the week, with the company delivering on an anticipated strong result.

Expected Ranges

AUD/USD: 0.7000 - 0.7200 ▼

AUD/EUR: 0.6450 - 0.6650 ▼

GBP/AUD: 1.7250 - 1.7450 ▲

AUD/NZD: 1.0800 - 1.1000 ▲

AUD/CAD: 0.9350 - 0.9550 ▲

AUD - Australian dollar

The Australian dollar sought to consolidate Wednesday’s late upturn, maintaining a break above US$0.71 despite an uptick in US rates and dollar demand. Having lurched through resistance at US$0.7060 following Wednesday’s inflation surprise, the AUD pushed through US$0.71 through trade on Thursday, marking fresh highs just north of US$0.7140, a level not seen since August. With domestic markets closed for Australia Day the AUD offered little through the local session tracking between US$0.71 and US$0.7120. Having pushed higher ahead of key US data notes the AUD then slid toward session lows at US$0.7080. Stronger than anticipated US GDP growth and a downturn in weekly jobless claims helped fuel a short-term surge in US dollar demand. The AUD however quickly found support edging back toward US$0.7115 after closer analysis of headline numbers suggest a broadly weaker US economy. While headline data remains elevated, strength across a few key data points belies an otherwise soft underbelly allowing investors to double down on bets the Fed will be forced to moderate the pace of interest rate adjustment when it meets next week.

With little of note’s on today’s domestic docket our attentions turn to Japanese CPI data ahead of next weeks run of central bank policy updates.

Key Movers

The Japanese yen was the weakest of majors through trade on Thursday giving up ground amid a backdrop of elevated global rates and expectations for an uptick in domestic inflation. The US dollar pushed through 130 to mark intraday highs at 130.61 before edging back toward 130.30 leading into this morning’s open. Stronger than anticipated US GDP data and a downturn in weekly jobless claims helped boost near-term demand for the USD. The world’s largest economy grew nearly 3% in the fourth quarter of 2022, spurred by sustained consumer demand. While consumer spending drove growth, a closer inspection of key US input indicators suggest the US economy is slowing down. Elevated consumer spending did slow when compared with activity through Q3 and action across retail and business investment plummeted. Inventory and building growth remained flat and while Jobless claims continued to run below expectations they do not reflect a string of recent layoffs. Continuing jobless claims are rising, suggesting it is taking longer now to find a job than it was 12 months ago, a sure sign cracks are appearing in the labour market.

In other news, the Canadian dollar was the strongest of the majors as oil prices provided upside support following the Bank of Canada’s decision to take stock and pause its tightening cycle.

With little of note on today’s ticket, outside Tokyo CPI data, our attentions turn to next weeks Fed and ECB policy updates.

Expected Ranges

AUD/USD: 0.6980 - 0.7180 ▲

AUD/EUR: 0.6480 - 0.6580 ▲

GBP/AUD: 1.7350 - 1.7550 ▼

AUD/NZD: 1.0890 - 1.0990 ▲

AUD/CAD: 0.9450 - 0.9550 ▼

AUD - Australian dollar

The Australian dollar consolidated a break above US$0.70 through trade on Tuesday, staving off attempts to break below the psychological handle and marking intraday highs at US$0.7055. Having bounced between US$0.7020 and US$0.7040 through much of the domestic session, the AUD tracked toward intraday lows at US$0.6995 as investors looked to take stock and reassess positions after a significant surge in risk demand over the past few days. The downturn, however, did not last long, with markets unwinding intraday moves following weaker-than-anticipated US PMI activity. The downturn across key US service sectors and reports of labour market uncertainty helped drive an AUD recovery. Attentions turn now to Domestic CPI data. Macro data sets suggest inflation pressures will remain sticky. While we don’t anticipate an upside surprise will move the RBA off, issuing a 25-point rate hike in February today’s print will go a long way in shaping forward guidance and rate expectations through H1.

Key Movers

Price action across major currencies was mixed through trade on Tuesday as markets reacted to various macroeconomic data points and a shift in the global rates backdrop. US PMI data lifted off November lows but still failed to rebound above 50, indicating activity across service sectors continues to contract. With cracks appearing in what has previously been a relatively robust labour market, fears of stagflation and recession continue to rise. Reports US giant 3M will cut its labour force by 2,500 workers following a sharp slowdown in December added to data revealing a significant downturn in temporary work with nearly 120,000 part-time or temporary employees losing their jobs in the last 5 months. All signs point to an economy in the throws of a marked slowdown, if not recession, and while a correction in risk appetite helped the US garner early gains, markets unwound the move and the USD remains under pressure.
In other news, the euro maintained a relatively narrow trading handle buoyed by a better-than-anticipated PMI print. Activity across Europe’s service sector expanded through December, marking 6 months highs and offering a sharp point of contrast to the US. Having touched intraday lows at US$1.0835, the euro tested US$1.09 before tracking sideways into the open.
The pound was the day’s worst performer giving up over 100 points following a downturn in services activity. PMI data showed activity contracted at its fastest pace in over a year as reports emerge of growing problems plaguing the UK service sector and labour force. Having broken above US$1.24, the pound plunged through US$1.23 to mark intraday lows at US$1.2275 before finding support and limping back toward US$1.2320.
Our attention focuses on the Bank of Canada today. While a 25-point rate hike is priced, the bank is nearing the end of its tightening cycle, and we anticipate some adjustments to forward guidance that could shape near-term CAD direction.
Please note there will be no commentary tomorrow. We will return on Friday after the public holiday.

Expected Ranges

AUD/USD: 0.6880 - 0.7120 ▲

AUD/EUR: 0.6420 - 0.6520 ▲

GBP/AUD: 1.7320 - 1.7680 ▼

AUD/NZD: 1.0780 - 1.0880 ▲

AUD/CAD: 0.9350 - 0.9450 ▲

AUD - Australian dollar

The Australian dollar outperformed major counterparts through trade on Monday, extending back through US$0.70 amid a sustained recovery in risk appetite. With little headline newsflow and top-tier macroeconomic data points on hand to drive direction, market attentions remain affixed to US monetary policy expectations.

Investors are seemingly encouraged by the recent downward shift in inflation pressures and subsequent US rate expectations, fueling gains across equities and key risk assets. The AUD was dragged higher through trade on Monday, following stocks upward and marking new highs just north of US$0.7040.

The Test now, can the AUD consolidate and extend this recent push into a weekly close above resistance? Our attention turns to domestic CPI inflation data tomorrow as a key marker of near-term direction. While inflation begins to ease across key counterpart economies domestic price pressures remain sticky. Another surprise uptick in the Consumer Price Index could force the RBA to reconsider any break in the current rate hike cycle and add a near-term floor under the AUD.

Key Movers

Price action across majors was mixed through trade on Monday as the euro marked fresh nine-month highs while the yen met sustained downward pressure. The USD extended its recovery against the yen, pushing back above 130 amid an improved global rates backdrop and continued shorting of the yen following last week's Bank of Japan policy meeting. Markets had anticipated the BoJ would announce changes to its outdated yield curve control policy and policymakers' decision to stay the course has forced markets to re-adjust short-term rate expectations and rewind recent JPY gains.

The euro surged toward fresh nine-month highs, breaking through 1.09 to touch 1.0925 before slipping back toward 1.0850 amid improved USD demand. The GBP failed to hold onto rallies beyond 1.24, slipping back below 1.2350, before finding support and moving back toward 1.2360 leading into this morning’s open.

Attention now turns to a slew of PMI data. We expect activity to have slowed across the US and UK while European data should point to improved activity. An uptick in European PMI could help the single currency consolidate a break above 1.09 as the focus shifts to next week's Fed and European Central Bank policy updates.

Expected Ranges

AUD/USD: 0.6870 - 0.7060 ▲

AUD/EUR: 0.6380 - 0.6520 ▲

GBP/AUD: 1.7480 - 1.7820 ▼

AUD/NZD: 1.0750 - 1.0880 ▲

AUD/CAD: 0.9320 - 0.9420 ▲

AUD - Australian dollar

Following weak jobs data from Australia that caused a drop below 0.6900, the AUD/USD eked out a little gain through the middle of North American trading on Friday. On Friday, things changed slightly since the AUD/USD made some gains while the USD matched its earlier advances. Indicators of a drop-off in existing home sales in the US by 1.5% are providing a glimpse into the difficulties buyers are facing as a result of high-interest rates and limited supply. On that note, Federal Reserve President Patrick Harker entertained the possibility of an interest rate downshift at the next release, mentioning that 25 basis point hikes will be sufficient moving forward. However, other Federal Reserve presidents do not share this, with KansaCiti Federal Reserve President stating that they must be patient and await inflation effects in the services sector. Overall, Friday was a positive day for the Australian dollar with the AUD/USD exchange rate closing out the day at 0.69670, posting an overall gain of 0.83%.

Key Movers

Improved risk sentiment helped lift commodity currencies through trade on Friday following a stronger than anticipated string of earnings data from Key US corporates. Earnings across the Tech sector helped fuel a rebound in equities while commentary from Fed speakers helped affirm expectations policymakers will slow the pace of rate hikes next week. The Fed is expected to issue a 25 point increase, pulling back from the 50 point hike issued in December as data sets suggest a slowdown in activity and shift toward economic recession. With the AUD, NZD, and CAD leading gains into the weekly close the Euro and GBP looked to consolidate gains with the Euro closing above 1.0850 while Sterling looks poised to test a break above 1.24. In other news the Japanese yen was the day's worst performer, offering some support to the dollar index as it gave up 129 and allowed the USD to climb back above129.50 leading into the weekly close/ CPI data surged upward, marking 4% y/y, a fresh 40 year high. While the BoJ insists inflation is transitory there is mounting pressure to move away from expansionary policy and give up yield curve controls.
With little of note on today’s macroeconomic ticket, our focus this week shifts to US advanced GDP data and the PCE index, as key measures of performance and inflation ahead of next week's Fed policy update.

Expected Ranges

AUD/USD: 0.6905 - 0.6970 ▲

AUD/EUR: 1.5698 - 1.5569 ▲

GBP/AUD: 1.7770 - 1.7930 ▼

AUD/NZD: 1.0750 - 1.0800 ▼

AUD/CAD: 0.9295 - 0.9350 ▲

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