The Australian dollar remains stuck in a familiar range

Source: Star Wars/Lucas Films

The Australian dollar remains stuck in familiar ranges this morning, awaiting a much-needed catalyst to dictate its next direction.

Here’s the latest scorecard as at 7.50am AEDT.

AUD/USD 0.7649 , -0.0012 , -0.16%
AUD/JPY 86.84 , -0.04 , -0.05%
AUD/CNH 5.0947 , -0.0024 , -0.05%
AUD/EUR 0.6562 , 0 , 0.00%
AUD/GBP 0.5801 , -0.0002 , -0.03%
AUD/NZD 1.1030 , 0.0009 , 0.08%
AUD/CAD 0.9716 , 0.0002 , 0.02%

After opening Friday’s session at .7677, the AUD/USD initially pushed lower following the release of updated inflation forecasts from the Reserve Bank of Australia (RBA) before recovering in Asian and early European trade.

The RBA now sees underlying inflation — a key determinant on the outlook for Australian interest rates — sitting below its 2-3% target band until the end of 2019, some 50 basis points lower than its previous forecasts offered in August.

“Limited market reaction reflected the fact the RBA was at pains to point out that the adjustment largely reflected the recently announced CPI re-weighting and did not change the Bank’s assessment of how inflationary pressures were likely to evolve,” said Ray Attrill, Head of FX Strategy at the National Australia Bank.

“The CPI re-weighting was estimated to take 0.4% off headline inflation and 0.3% off underlying inflation this year.”

Others, however, suggested that the downgrade reinforces the view that the RBA is unlikely to begin normalising interest rates for the foreseeable future, putting it at odds with the policy outlook for other major central banks in the period ahead.

However, a slight lift in risk aversion — leading to modest losses in European and US stocks — along with a lift in US bond yields, saw the AUD/USD eventually slide into the close, finishing the week at .7661.

It’s fallen further in recent trade, perhaps as a result of renewed political uncertainty following another poor poll for the ruling Liberal-National Coalition released this morning.

As seen in the hourly chart below, even with the recent weakness, the AUD/USD remains stuck in a range for the moment.

AUD/USD Hourly Chart

It’s sorely in need of a catalyst to dictate which direction it will move from here.

Today, there’s little on the economic calendar, hinting that the recent ranges will be maintained for some time yet.

Domestically, RBA deputy governor Guy Debelle will speak on “Business Investment in Australia” from 9am AEDT. Given this has been one area that the RBA has been optimistic on for some time, it’s likely to contain hawkish overtones throughout.

Philadelphia Fed President Patrick Harker is also scheduled to speak in Japan from 11.10pm AEDT.

Elsewhere, the events calendar is bare, hinting that movements in Chinese commodity futures and in the JPY and CNY could be influential on those in the Aussie today.

It’s likely to be a slow day in the absence of an unexpected headline, especially with many major central bank speeches and data releases scheduled in the coming days.

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