Softer USD and improving market sentiment allow AUD/USD to climb

Daily Currency Update

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 ▲