AUD worst performed among majors as risk off mood extended

Daily Currency Update

The Australian dollar marked fresh lows through trade on Wednesday as risk sentiment continues to sour in the face of rising bond prices and a stronger US dollar. The VIX index, a measure of volatility, has moved steadily higher this week as investors exit equities and risk assets in pursuit of haven assets. Having slipped below US$0.64 earlier this week, the AUD tested a break below US$0.6350 marking intraday lows at US$0.6330 before finding support. Risk sentiment remains downbeat as ongoing concern surrounding China and the global economic outlook combine with rising concern the US government will be forced to shut down come midnight on Saturday. While a stopgap measure to secure funding for a further 4-6 weeks is expected to be passed through the House and Senate on Friday, the uncertainty created by bipartisan politicking is amplifying the risk-off mood. Inflation pressures are lingering, as evidenced by yesterday’s uptick in monthly CPI data, as are fears that interest rates will remain higher for longer are adding further pressure on risk assets and elevating fears of recession.

Attentions turn now to German CPI data tonight with domestic retail sales and US jobless claims providing second-tier macro markers. We expect little change in the risk narrative with the AUD to remain under pressure testing moves toward 0.63.