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AUD

13 Jul 2023

More upheaval lies ahead.

We are looking for the Australian dollar’s volatility to continue through the third quarter. We see the exchange rate oscillating in a 0.65-0.69-cent range as various crosscurrents play out. The list includes more market turbulence, global and Australian recession fears, China’s stumbling recovery and weaker renminbi, narrower interest rate differentials, the flow support from Australia’s current account surplus (circa-1.4 percent of gross domestic product), and solid underlying commodity demand from the global green energy push. But beyond the next few tricky months, our underlying view continues to be for the Australian dollar to edge up into the low 0.70’s by...

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12 Jul 2023

Cross-Check: AUD/NZD – Diverging trends

As was universally expected the Reserve Bank of New Zealand kept its Official Cash Rate at 5.5% at today’s meeting. This is the first time the RBNZ has not raised the OCR since the August 2021 meeting. The RBNZ went early and hard, delivering an eye-watering 525bps worth of rate hikes between October 2021 and May 2023. As a result, policy settings in NZ are well into ‘restrictive’ territory (i.e. above the estimated equilibrium ‘neutral’ rate). From our perspective, the underlying message from the RBNZ and developments across the NZ economy suggest that without another positive inflation shock the move...

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11 Jul 2023

US CPI in focus

• Softer USD. Strong UK wages has bolstered BoE rate hike expectations, supporting GBP. The JPY has also continued to recover lost ground.• US inflation. Large base-effects & some other drivers point to a sizeable step down in US CPI. If realised, this could exert more pressure on the USD.• AUD events. Ahead of the US CPI, RBA Governor Lowe speaks & the RBNZ policy decision is announced. No change by the RBNZ is expected. Mixed fortunes across markets, with focus still very much on tonight’s US CPI report (10:30pm AEST). Offshore equity indices edged higher (US S&P500 and EuroStoxx50...

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10 Jul 2023

China has a different inflation problem

• Mixed markets. US yields & the USD Index lower. But AUD underperforms as concerns about China’s economic trajectory remain in place.• China deflation risks. China CPI/PPI inflation underwhelmed, another sign the post-COVID recovery is faltering. Measures are needed to reinvigorate demand.• US inflation. US CPI (released Weds night AEST) is a focal point. Base-effects point to a further step down in inflation. This could exert more pressure on the USD. A relatively quiet start to the new week across markets. Overnight, European and US equities posted modest gains (S&P500 +0.2%), oil prices gave back some ground (WTI crude -0.9%),...

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09 Jul 2023

Payrolls weigh on the USD

• US payrolls. Non-farm payrolls came in lower than expected. But other detail in the report shows that the US labour market is still tight.• Softer USD. The USD weakened. US CPI in focus this week. Base-effects point to a further step down in inflation. This could exert more pressure on the USD.• AUD rebound. AUD has bounced back. In addition to the US CPI, RBA Governor Lowe speaks on Wednesday. We think the AUD may recover more ground. A tumultuous week for markets was brought to a close by the release of the US labour market report on Friday....

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