AUD unable to sustain momentum in face of surge in US treasuries
Daily Currency Update
The Australian dollar faltered through trade on Wednesday, giving up ground against the USD amid a surge in yields and a sell-off among risk assets. AUD tracked within a narrow range through the domestic session despite comments from new RBA Governor, Michelle Bullock that inflation, specifically services inflation, is expected to run above target through the foreseeable short term. After tracking between US$0.6350 and US$0.6360 the AUD bounced toward intraday highs at US$0.6390, following stronger-than-expected China activity data. There was a fair bit of pessimism surrounding the September activity update and a rebound in consumption-led growth helped to lead a short-term improvement in risk demand. With the AUD seemingly poised to test a break above US$0.64, US treasuries surged and global bond markets met increased pressure forcing a sell-off across risk assets. With the USD re-gaining momentum, the AUD slipped below US$0.6350 only finding support at US$0.6330.Attention now turns to domestic labour market data. We anticipate a 20,000 increase in employment opportunities and the unemployment rate to remain steady. A robust read in the wake of RBA governor bullock comments and sticky inflation indicators could elevate calls for one last rate hike this year. The offshore session will be dominated by Federal Reserve Chair, Jerome Powell’s commentary.
Key Movers
The US dollar advanced through trade on Wednesday, dragged upward by higher treasury yields and expectations for at least one more Fed rate hike. US treasuries marked fresh multi-year highs ahead of today’s all-important commentary from Federal Reserve Chair, Jerome Powell. With key FOMC policymakers suggesting tighter financial conditions will be enough to contain inflation Powell’s comments will be crucial in determining near-team rate expectations following a strong of stronger labour market data and sticky price pressures. The USD DXY jumped four-tenths before paring gains and settling. The Euro slipped back below 1.0550 while the GBP slid below 1.2150 despite a higher-than-anticipated inflation print. Headline inflation held steady at 6.7% versus expectations of a dip to 6.6%. That said, Bank of England projections in August still had inflation running near 6.9% so the elevated read did little to change market expectations for monetary policy. We are still pricing just a 25% chance of a hike in November.Attentions now turn to Fed Chair, Jerome Powell and any insight into Fed thinking ahead of the November FOMC policy update.
Expected Ranges
- AUD/USD: 0.6280 - 0.6420 ▼
- AUD/EUR: 0.5980 - 0.6080 ▲
- GBP/AUD: 1.9000 - 1.9400 ▲
- AUD/NZD: 1.0750 - 1.0850 ▲
- AUD/CAD: 0.8650 - 0.8750 ▲