Home Daily Commentaries AUD tracks sideways amid rising concerns surrounding another COVID-19 outbreak in China

AUD tracks sideways amid rising concerns surrounding another COVID-19 outbreak in China

Daily Currency Update

The Australian dollar offered little to excite investors through Wednesday maintaining a narrow trading handle in what was a largely lacklustre trading session. The AUD shifted toward intraday lows at 0.7305 through the domestic session as Tuesday’s risk aversion permeated sentiment early. Concerns another COVID-19 outbreak in China could again derail hopes for a recovery in economic growth escalated amid a slew of negative headlines emerging from Fujian province. The reintroduction of widespread lockdowns and restrictions are expected to dampen activity in September, compounding softer than expected data performance through August. The AUD did manage to find some momentum overnight as the US dollar weakened across the board. Extending to intraday highs at 0.7335 the AUD has tracked sideways through the last few hours buying 0.7331 at the time of writing.

Our attentions today shift to domestic labour market data. We expect numbers will be distorted thanks to the lockdowns in NSW, ACT and Victoria. With the risk narrative continuing to steer direction we remain with evolving pandemic developments in China as a key marker for global growth expectations. Worsening conditions and extended lockdowns could prompt another extended run on risk and see the AUD test supports at 0.73 US cents.

Key Movers

Price Action across major currencies was limited through trade on Wednesday with the Norwegian kroner and Canadian dollar the only units to offer any impetus for excitement. Buoyed by a 3% surge in oil prices the currency outpaced all other counterparts advancing 0.7% and 0.3% respectively. The US dollar is broadly weaker while sterling found supports on a stronger than anticipated CPI inflation print. Data showed price pressures in the UK surged at the strongest pace of increase in over nine years, firming expectations the Bank of England will have no choice but to raise interest rates. Sterling advanced 0.2% toward 1.3850. Broader risk aversion and global economic uncertainty are expected to continue to cap gains in the near term but a widening spread between the base rate and gilt yields should offer the pound some support on moves below 1.38 and approaching 1.37.

Expected Ranges

  • AUD/USD: 0.7270 - 0.7390 ▲
  • AUD/EUR: 0.6150 - 0.6230 ▲
  • GBP/AUD: 1.8730 - 1.9030 ▲
  • AUD/NZD: 1.0280 - 1.0350 ▼
  • AUD/CAD: 0.9220 - 0.9320 ▼