Home Daily Commentaries Rinse and repeat; another sorry day for the AUD

Rinse and repeat; another sorry day for the AUD

Wednesday 4 October, 2023

Daily Currency Update

New day, same old story. The AUD broke fresh lows through trade on Tuesday as global rates moved higher and yield curves continued to steepen pushing investors toward the USD amid a weakening demand for risk. Markets largely ignored the RBA as policy makers opted to leave rates on hold while maintaining a modest tightening bias. The statement appeared deliberately similar to that of last month, as if to signal the status quo will be maintained under the stewardship of new Governor Michelle Bullock. Instead, our attentions drifted offshore as a stronger-than-expected US JOLTS jobs report drove an extension in the bear steepening for US treasuries, pushing 10-year rates up 11 basis points to 4.79% while two-year rates are now comfortably above 5%. Having broken last week’s low at US$0.6330 the AUD continued giving up ground to the USD, sliding below US$0.63 and marking intraday lows at US$0.6287.
Having clawed back above US$0.63 leading into this morning’s open our focus now turns to US ISM Services data. After the surprise uptick in August, we expect a modest retracement this month. Another shock to the upside will only elevate the current narrative and heap more pressure on an already embattled AUD. The October 2022 low of US$0.62 is now in sight.

Key Movers

The US dollar continues to extend its upward run, advancing against all counterparts, excluding the yen, through trade on Tuesday. The USD DXY index hit a fresh 2023 high following the JOLTS Job report wherein job openings unexpectedly rose through August. After a run of declines, the sharp uptick surprised investors and points to lingering resilience within the labour market, firming bets the Fed will be able to maintain higher rates through 2024. With equity markets in freefall and treasury yields steepening, the US dollar enjoyed modest gains against both the euro and GBP forcing the euro briefly below US$1.0450 and the GBP toward US$1.2050. While the USD climbed above ¥150 after the jobs data a quick collapse saw it move back toward ¥147 before settling at ¥149. While there is no official confirmation of intervention from the Ministry of Finance it appears it at least made inquiries with banks as to pricing, which was enough to trigger the correction.
Our attention now turns to commentary from European Central Bank president Lagarde while US ISM services data dominates the macro docket ahead of Friday’s all-important Non-farm payroll print.

Expected Ranges

  • AUD/USD: 0.6250 - 0.6380 ▼
  • AUD/EUR: 0.5980 - 0.6100 ▼
  • GBP/AUD: 1.9000 - 1.9400 ▲
  • AUD/NZD: 1.0650 - 1.0750 ▼
  • AUD/CAD: 0.8600 - 0.8700 ▼