AUD falls below 69 US cents

Daily currency update

The Australian dollar is weaker this morning when valued against the US dollar trading just below US$0.69. On the data front yesterday Australian Retail sales rose a better-than-expected 0.9 per cent in May in seasonally adjusted terms, and surged 10.4 per cent in the lockdown-hit month of May 2021. The rise in May was the fifth consecutive monthly rise in retail turnover. Economists were expecting a 0.4 per cent monthly increase. As a result, the Australian dollar may face more downside pressure as an aggressive series of central bank rate increases hurt Australian consumers. The Reserve Bank of Australia is expected to lift interest rates to 2.1 per cent by the year’s end, versus market expectations of 3.3 per cent. Looking ahead this week and on Friday we will see the release of the AIG Manufacturing Index a Survey of about 200 manufacturers which asks respondents to rate the relative level of business conditions including employment, production, new orders, prices, supplier deliveries, and inventories. From a technical perspective, the AUDUSD pair is currently trading at US$0.6874. We continue to expect support to hold on to moves approaching US$0.6850 while now any upward push will likely meet resistance around US$0.6955.

Key movers

Overnight US Federal Reserve chairman Jerome Powell has warned that time is running out for central banks to slam the brakes on inflation before people’s inflationary expectations set in and create a costly and self-perpetuating price spiral. Echoing Reserve Bank of Australia governor Philip Lowe’s comments last Friday, he said the path back to 2 per cent inflation without triggering a recession was narrow – and in the past few months “it has gotten harder, the pathways have gotten narrower”. The Fed upped its benchmark rate by 0.75 percentage points to a range of 1.5 to 1.75 per cent at its June meeting, the sharpest increase in 25 years. The expectation is that the Fed Funds rate will fetch up at about 3.4 per cent by the year’s end. Overnight US 10-year yields are currently down more than 7bps, near 3.10%, having pushed above 3.18% earlier in the session. The S&P 500 struggled for direction Wednesday falling 0.2%, the Dow Jones Industrial Average gained 0.3%, or 78 points and the Nasdaq was down 0.10%. With the end of the month and the second quarter a day away, the S&P 500 has set a course for its biggest first-half percentage drop since 1970.

Expected ranges

• AUD/USD: 0.6750 – 0.6950 ▼
• AUD/EUR: 0.6450 – 0.6650 ▼
• GBP/AUD: 1.7500 – 1.7700 ▲
• AUD/NZD: 1.0950 – 1.1150 ▲
• AUD/CAD: 0.8750 – 0.8950 ▼