Hawkish Fed officials and stronger US data force AUD below 0.72

AUD - Australian Dollar

The Australian dollar fell below 0.72 US cents through trade on Wednesday amid a slew of stronger than anticipated US data sets and hawkish commentary from yet another Fed official. Having tracked sideways for much of the domestic session, bouncing between 0.7205 and 0.7230, the AUD fell steadily overnight, giving up 0.72 to mark intraday and 56-day lows at 0.7185. Commodity currencies found some support with the recent resurgence in iron ore prices and optimism Chinese stimulus will help maintain demand for steel production, adding a floor on the days depreciation, allowing the AUD to make up ground against other crosses. Having fallen early, the AUD climbed back above 0.54 British pence and 0.6425 euro, while closing in on 1.05 NZD.

Our attentions today turn to the release of the Fed’s minutes from the November policy meeting, however a string of stronger data sets and shift in the tone of fed commentary since the last official policy update will likely see markets set aside this month’s minutes and instead focus on squaring positions into the Thanksgiving holiday weekend.

Key Movers

The US dollar extended gains through trade on Wednesday amid a string of stronger macroeconomic data sets and hawkish fed commentary. Jobless claims fell to their lowest level since 1969, while personal income and spending data in October rose faster than expected following an uptick in wage growth. Consumer sentiment did fall to a decade low, yet investors largely ignored this data point given the survey has absorbed a broader political bias in recent years. Core Durable goods orders rose, while headline orders proved resilient, weighed down only by a fall in demand for new aircraft. The strong rebound in business investment and a depreciation in the trade deficit combined to help drive expectations the US economy is now well on track to a full recovery. Key dollar indices rose a further 0.4%, with added support coming following commentary from San Francisco Fed president Daly. Daly joined other key policy makers in suggesting a faster pace of QE adjustment could be warranted. With the Fed continuing to point to CPI data and jobs performance as key markers for direction, we are keenly attuned to November non-farm Payrolls and CPI data sets ahead of the December 16 policy meeting. The euro has fallen below 1.12, while sterling appears poised to break 1.33 and the yen continues to give up ground with the USD consolidating a move above 115, touching highs at 115.15.

Expected Ranges

AUD/USD: 0.7170 - 0.7230 ▼

AUD/EUR: 0.6380 - 0.6450 ▲

GBP/AUD: 1.8420 - 1.8650 ▲

AUD/NZD: 1.0380 - 1.0520 ▲

AUD/CAD: 0.9070 - 0.9170 ▼