AUD buoyed by improved demand for risk

AUD - Australian Dollar

The Australian dollar advanced through trade on Tuesday buoyed by bolstered demand for risk across financial markets. Investors largely ignored reports that Johnson and Johnson’s COVID-19 vaccine has been suspended in the US after studies showed a similar clotting issue to the that linked with the AstraZeneca vaccine. Instead, having tested a break below 0.76 US cents the AUD rallied to touch intraday highs at 0.7650 following a surprise uptick in US inflation data. The uptick in US CPI data did little to influence expectations for Fed pricing and monetary policy, with policymakers adamant they will continue to look through inflation data through the short term. The uptick did however force US treasury yields lower, driving a 7 basis point decline and dragging the USD lower.

Attentions now turn to Thursday's domestic labour market print. Employment performance has improved dramatically in a post pandemic environment. A depreciation below 5.8% will help assure investors the recovery and economy are on stable ground and perhaps drive a push toward 0.77 US cents. That said, analysts have largely priced in improvements in labour market performance and anything short of a surprise outperformance will likely see the AUD maintain recent ranges, prompting investors to seek another catalyst to re-ignite bullish upside.

Key Movers

The US dollar fell through trade on Tuesday, forced lower following a decline in treasury yields and an uptick in appetite for risk. The dollar index fell four tenths of a percent amid upside across most major counterparts. The euro pushed toward 1.1950, while the JPY neared a break below 109 and the GBP touched 1.3770. Despite the improved risk demand the GBP struggled to make the most of broader USD weakness amid reports that known inflation Hawk, Andy Haldane, will leave the Bank of England in June. Haldane has been an advocate for moving sooner to prevent an uptick in inflationary pressure and his departure will likely skew the MPC toward a more conservative and longer run, wait and see, approach. With little of note on today’s macroeconomic ticket we expect volatility across commodity markets will remain largely subdued ahead of Thursday's US retail sales print.

Expected Ranges

AUD/USD: 0.7590 - 0.7720 ▲

AUD/EUR: 0.6370 - 0.6420 ▼

GBP/AUD: 1.7880 - 1.8120 ▼

AUD/NZD: 1.0770 - 1.0890 ▼

AUD/CAD: 0.9530 - 0.9620 ▲