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Daily Currency Update
The Australian dollar is stronger this morning when valued against the Greenback. The Australian Dollar hit a fresh six-month high against the US Dollar on Friday, albeit Thursday’s US data showed that inflation continued to grind lower. Therefore, the AUD/USD pair is trading at 0.6973 at the time of typing. Better-than-expected Consumer Price Index (CPI) reading last week augmented speculations for further tightening by the Reserve Bank of Australia (RBA), bolstering the AUD/USD to fresh multi-month highs. However, the futures market shifted on the release of US CPI data as traders expect rates to peak at around 3.73%, from 4% last week. Another factor that underpinned the AUD was China’s easing restrictions on coal imports. The increasing need to secure energy supplies after easing COVID-19 restrictions has pushed China to gradually resume Australian coal imports and urge domestic miners to boost their already record out. The lifting of the unofficial ban on Australian coal imports, which were halted in 2020 in a fit of Chinese pique over questions on COVID’s origins, is the clearest sign yet of the renewed ties between them. Looking ahead this week and the World Economic Forum in Davos, Switzerland, kicks off this week. It’s an annual meeting where a global elite of business leaders, politicians, and economists make bold predictions and try to set the agenda for the year ahead. On Monday we will also see the release of the Westpac Consumer Sentiment a survey of about 1,200 consumers that asks respondents to rate the relative level of past and future economic conditions, employment, and climate for major purchases. On Thursday all eyes will be on the release of the Australian Jobless rate by the Australian Bureau of Statistics. The unemployment rate is expected to remain at 3.4%.
Key Movers
The Pound Sterling is slightly weaker when valued against the Greenback following Friday’s release of the University of Michigan (UoM) Consumer Sentiment for January in the US, which exceeded estimates, while the poll showed that inflation expectations for one-year were downward revised. At the time of writing, the GBP/USD is trading at 1.2196 after hitting a daily low of 1.2150. On the UK data front the Gross Domestic Product (GDP) unexpectedly grew by 0.1% in November as consumers headed to the shops in the run-up to Christmas and pubs and bars enjoyed a boost from the men’s World Cup. Raising the government’s chances of avoiding a long recession, City economists said hard-pressed consumers had proved more resilient than forecast despite the cost of living crisis. However, business groups warned that the economy was likely to suffer over the coming months as higher mortgage rates and the withdrawal of state support for energy bills begin to hit disposable incomes further. Cost of living pressures are likely to become more acute this year as tax rises and the withdrawal of government subsidies take effect. The Bank of England has warned that the UK is probably set for a long recession, as defined by two consecutive quarters of contraction. The economy shrank by 0.3% in the third quarter between July and September, and figures for the October to December period will be published next month, confirming whether or not the economy entered recession at that point. Looking ahead to next week, the UK economic docket will feature labor market data, the Consumer Price Index, and Retail Sales.
Expected Ranges
- AUD/USD: 0.6850 – 0.7050 ▲
- AUD/EUR: 0.6350 – 0.6550 ▲
- GBP/AUD: 1.7350 – 1.7550 ▼
- AUD/NZD: 1.0750 – 1.0950 ▲
- AUD/CAD: 0.9200 – 0.9400 ▲
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