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Bond market volatility sees AUD plunge overnight

AUD - Australian Dollar

The Australian dollar fell sharply overnight giving up 100 points and marking intraday lows at 0.7710. Having tracked sideways for much of the domestic session, the AUD appeared to be gaining some upward momentum, pushing through 0.78 to touch 0.7813 through the early stages of the European session. It then bounced between 0.7780 and 0.7810 through much of the evening before a steep and sharp correction. The AUD tumbled steeply toward 0.77 US cents as bond market volatility again drove a push toward haven assets and treasury yields. Commentary from Fed Chair Jerome Powell failed to satisfy markets expectations for yield curve management, forcing equities lower and US yields higher still. It seems markets were looking for some push back from the Fed after 10-year yields broke above 1.5% this week. Powell instead reiterated the bank's commitment to the current policy standard.

Attentions turn now to US non-farm payroll numbers, while bond market volatility will ensure the AUD remains vulnerable to further short-term depreciation. With support at 0.77/0.7680 still intact, we are watching if a break below this handles a signal for further weakness.

Key Movers

The US dollar appreciated through trade on Thursday, buoyed by a push toward haven assets and an uptick in yield values. The S&P 500 and Nasdaq both shifted lower, led by losses across tech stocks as treasury yields rose. 10-year notes pushed above 1%, dragging Bloomberg dollar index toward one-month highs. USD strength forced the euro back below 1.20 toward intraday lows at 1.1970, while the Great British pound again fell short of a break above 1.40. Having touched intraday highs at 1.4012, sterling followed the majority of major currencies lower as bond market volatility again took hold. The Canadian dollar and Norwegian kroner were the only currencies to outperform the USD. Comments from Saudi Arabia oil minister, confirming the country was in no rush to restore voluntary cuts, helped drive oil prices higher.

Attentions turn to tonight’s US non-farm payroll print as the headline macroeconomic item on the agenda, with bond price volatility continuing to steer the underlying narrative and general direction into the weekly close.

Expected Ranges

AUD/USD: 0.7630 - 0.7850 ▼

AUD/EUR: 0.6380 - 0.6520 ▲

GBP/AUD: 1.7780 - 1.8120 ▲

AUD/NZD: 1.0720 -1.0790 ▲

AUD/CAD: 0.9750 - 0.9880 ▼