AUD/USD clambers higher on hawkish RBA minutes

Daily currency update

The Australian dollar crept back above US$0.67 through trade on Tuesday, buoyed by a broadly weaker US dollar and surprisingly hawkish RBA sentiment. Having tracked between US$0.6680 and US$0.67 through the early part of the domestic session the AUD rallied following the releases of the RBA April policy meeting minutes. The minutes offered greater detail as to why the RBA opted to pause its tightening cycle, suggesting the purpose was “to allow more time to gather information”, and stating it was “clear further tightening will be needed”. The tone struck was distinctly more hawkish than that proffered in the wake of the policy update and suggest a rate hike in May is on the table. With last week’s robust labour market print, our attentions turn now to quarterly inflation data. CPI figures are due at the end of the month and will prove pivotal in shaping RBA policy. Should price pressures remain sticky the likely hood of an 11th rate adjustment increases, underpinning the AUD and potentially offering a catalyst to propel it outside recent ranges. Having pushed through US$0.67 broad-based US dollar weakness allowed the AUD to extend toward US$0.6750, marking intraday highs at US$0.6745 as investors looked to unwind Monday’s dollar gains. Our attentions turn offshore with UK CPI data the only headline macroeconomic item on the agenda.

Key movers

Despite a slew of economic data and earnings reports price action across equities, treasuries and major currencies was largely muted through trade on Tuesday. The US dollar retreated on the day as investors sought to unwind Monday’s rally, allowing key major counterparts to rally back toward Friday highs. The euro has pushed back toward US$1.0980 while the GBP eyed a break back above US$1.2450 and the yen forced the dollar back below ¥134.50 and ¥134.00. Our attentions turn to UK CPI data as the only major release. We anticipate a further moderation in price pressures, in particular a correction in core inflation back toward 6% y/y. If price pressures prove sticky the GBP may find support as calls for tighter Bank of England monetary policy gather momentum.

Expected ranges

• AUD/USD: 0.6650 – 0.6780 ▲
• AUD/EUR: 0.6080 – 0.6150 ▼
• GBP/AUD: 1.8280 – 1.8620 ▲
• AUD/NZD: 1.0780 – 1.0880 ▲
• AUD/CAD: 0.8950 – 0.9050 ▲