Home Daily Commentaries AUD pushes back against early risk of tone

AUD pushes back against early risk of tone

Daily Currency Update

The Australian Dollar advanced through trade on Monday, pushing back against an early risk off tone and extending back above 0.69 US cents. Markets were clearly nervous to start the week continuing Friday’s move away from key equity indices and risk assets. Having suffered a steep correction into last week's close following Fed Chair Jerome Powell’s confirmation the FOMC intends to pursue a program of higher rates and tighter monetary policy, the AUD continued lower on open, breaking toward intraday lows at 0.6840.  The US dollar index surged to fresh 20-year highs and appeared set to extend its record run before markets took pause and unwound gains allowing the AUD to recoup losses and extend back above 0.69 US cents. Improved risk sentiment and a broader correction across 2-year and 10-year US treasury yields helped propel the AUD toward intraday highs at 0.6927. With little of note on today’s macro ticket our attentions turn to German CPI data and a US consumer confidence update as key markers of global macroeconomic health, while the broader risk narrative should control any significant AUD upturn.

Key Movers

There was ample price action across majors through trade on Monday as investors square positions following the weekends Jackson Hole Symposium on Monetary Policy. A risk off tone enveloped markets early, while a surge in 2-year and 10-year US treasury yields helped the DXY dollar index mark a fresh 20 year high. Having made there highest level since 2007 2-year treasury yields corrected lower through the overnight session while European yields led a broader global rates rally. The correction in US yields back to the daily open helped snuff out any USD extension on the day and fostered an upturn across most key majors. Having eyed a break below 0.99 the Euro rallied back toward Parity as a more hawkish ECB outlook and surprise reduction in Gas prices helped alleviate pressure on the embattled shared unit. A key take away from last week was revelations the ECB remains committed to controlling inflation despite fears tighter monetary policy will foster a deeper and longer recession. The promise of higher ECB coupled with a downturn in Gas futures as officials announced plans to deliver key structural reform across Europe’s Energy Market. Plans to break the link between rising gas prices and the end cost of consumer electricity helped drive a 20% correction in Dutch gas futures, albeit off an all-time record high. The Euro remains incredibly vulnerable but a narrowing in the gap between ECB and Fed policy should help to alleviate some of the recent bearish pressures.

Our attentions today turn to German CPI and US consumer confidence data ahead of Fridays all important US non-farm payroll print.

Expected Ranges

  • AUD/USD: 0.6840 - 0.6980 ▲
  • AUD/EUR: 0.6850 - 0.6950 ▼
  • GBP/AUD: 1.6820 - 1.7180 ▼
  • AUD/NZD: 1.1120 - 1.1250 ▼
  • AUD/CAD: 0.8920 - 0.9040 ▲