AUD forced lower amid extended Chinese yuan weakness
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Daily Currency Update
The Australian dollar tracked within a narrow range through trade on Tuesday, caught between conflicting drivers. An uptick in key commodity prices helped lift the AUD off intraday lows and back toward US$0.65, before Chinese yuan weakness spilled over into the AUD and NZD, prompting a dip back toward supports at US$0.6450. The AUD faces significant near-term headwinds, and it is increasingly vulnerable to further yuan weakness and US/China trade war headlines. We are keenly attuned to Chinese authorities and their response to President-elect Trump's promised 10% tariff. If officials allow the yuan to weaken the AUD could well test new lows leading into the end of the year.Today, our attention turns to Q3 GDP data ahead of US private payroll numbers and ISM services data as key macro markets while political and geopolitical developments dominate sentiment and headlines.
Key Movers
The biggest move overnight has been in the Korean won which tumbled following the stunning declaration of Martial Law by the South Korean President. The move comes after months of political wrangling and impasse as the President’s minority government battles the main opposition party. While lawmakers immediately and unanimously voted to lift martial law military leaders refused announcing they would uphold Martial Law until otherwise ordered by the President. Korean assets and the won plunged nearly 3% before a pledge of support helped ease market fears. There was little spillover into other currencies and price action across majors has otherwise been relatively subdued. The Chinese yuan faced increased selling pressure and the USD/CNY pushed toward ¥7.30. With no fresh political developments in France, the euro has recovered some of Monday’s losses, edging back above US$1.05. With lawmakers holding a no-confidence vote this evening we wait to see whether Macron will be forced to appoint a new Prime Minister.Our attention now remains on French politics while US private payroll data and ISM services data will provide a key snapshot of US economic health.
Expected Ranges
- AUD/USD: 0.6400 - 0.6550 ▼
- AUD/EUR: 0.6120 - 0.6220 ▲
- GBP/AUD: 1.9400 - 1.9700 ▼
- AUD/NZD: 1.0980 - 1.1120 ▲
- AUD/CAD: 0.9050 - 0.9150 ▲