Australian dollar marks fresh 2023 low as risk sentiment deteriorates

Daily Currency Update

In the absence of any headline newsflow, the Australian dollar remained under pressure amid a deteriorating risk narrative. Sentiment surrounding China’s economic outlook continues to weigh on the AUD as investors face up to a myriad of negative headlines and bad news. A loss of momentum perpetuated by rising concerns for the health of the property market has prompted investors to seek safe haven assets, exiting Asian equities and driving the Chinese yuan lower.

With the USD/CNH tracking toward 7.3, the AUD was dragged toward intraday and year-to-date lows at US$0.6454 through trade on Monday. Having found some support, the AUD then tracked between US$0.6455 and US$0.65 overnight ahead of a busy macro ticket today.

The domestic wage price index is expected to show a near 1% uplift through Q2 and will be keenly watched by RBA policymakers, a critical metric in determining whether rates can remain on hold through the months ahead. Softer wage growth will afford the RBA the opportunity to monitor economic conditions, leaving rates on hold and potentially heaping more pressure on the AUD.

China activity data dominates the international docket and all lead-in indicators suggest a soft read. Another poor showing will only exacerbate the current narrative, while a surprise uptick may offer a short-term reprieve and help lift the AUD back above US$0.65.