AUD closes in on new yearly low
Thursday 16 February, 2023
Daily Currency UpdateThe Australian dollar fell through trade on Wednesday giving up US$0.69 amid souring risk sentiment and a broadly stronger US dollar. Having opened near US$0.70 the AUD fell steadily through the domestic session as risk demand faltered and investors appeared reluctant in extending gains amid a backdrop of higher global rates and near-term monetary policy uncertainty. Reserve Bank governor Philip Lowe spoke at a senate hearing and offered little new guidance, instead reiterating the banks hawkish commitment to controlling inflation. With little else of note on the domestic ticket attentions turned to the keenly anticipated US retail sales data update. Consumer spending jumped 3% in January, suggesting consumer demand in the US remains strong. The upturn in activity surpassed consensus estimates and helped drive GDP expectations, bond yields and rate estimates higher. Sustained strength across the labour market, key services and consumer demand have elevated expectations for Fed policy as market adjust forecasts expecting rates to remain elevated for longer. The AUD slid below US$0.69 touching intraday lows south of US$0.6870 before finding support. Down 1.5% on the day the AUD has found some backing and opens this morning right on US$0.69. Our attentions turn now to local labour market data where we anticipate steady jobs growth and an unemployment rate of 3.5%. A robust read will underpin expectations for more hawkish RBA policy while any signs of fragility could see the currency test year to date lows and break toward US$0.6850.
Key MoversThe US dollar outpaced all majors through trade on Wednesday elevated by stronger than anticipated domestic data and a souring in risk demand. US retail sales lurched upward in January surpassing consensus estimates and defying suggestions consumer sentiment is wavering. Retail spending jumped 3% while housing data improved and manufacturing tracked higher. The balance of stronger data has prompted analyst to lift US GDP expectations, fueling an uptick in bond yields and rates. The narrative has shifted and there is now a broadly held expectation interest rates will remain elevated for longer. 2 and 10 year yields rose forcing a downturn across key equity indices and risk assets. The negative risk backdrop and higher global rates hurt commodity currencies and the Yen. The JPY gave up more ground to the USD as the worlds base currency pushed through 134 JPY. The Euro slipped below US$1.07 while the GBP was one of the days worst performers down 1.4% on the day. UK CPI inflation fell more than markets anticipated but still remains shockingly high at 10.1% While there is a expectation The Bank of England will need to maintain interest rate pressure in order to control inflation through the medium term UK yields fell on the day, widening the yield differential and exacerbating the GBP downturn. Having given up US$1.21 and US$1.2050 the GPB found support on moves below 1.20 and opens this morning marginally above 1.2025. With little of note on today’s macroeconomic ticket our attentions turn to commentary from key Fed policy makers.
- AUD/USD: 0.6830 - 0.7000 ▼
- AUD/EUR: 0.6430 - 0.6520 ▼
- GBP/AUD: 1.7320 - 1.7580 ▼
- AUD/NZD: 1.0950 - 1.1050 ▼
- AUD/CAD: 0.9180 - 0.9320 ▼