Home Daily Commentaries AUD extends downturn despite rebound in equities and risk sentiment

AUD extends downturn despite rebound in equities and risk sentiment

Daily Currency Update

AUD - Australian Dollar

The Australian dollar continued its downward correction through trade on Thursday slipping below 0.73 US cents, despite a rebound in equities and an improvement across risk assets. Domestic labour market data underperformed in October, showing a surprising contraction in employment growth and an uptick in the underlying unemployment rate. The AUD tested 0.73 before finding some support, as investors appeared reluctant to place too much stock in current labour market performance. NSW, Victoria, and the ACT are only now emerging from harsh lockdown restrictions, and forward indicators suggest strong gains across the labour market should be enjoyed in the coming months. Markets continue to price in a 100-basis point rate hike through the next 13 months, confident as inflation expectations rise the RBA will have no choice but to abandon its dovish forward guidance policy. Having tracked sideways through what was a largely quiet overnight session, the AUD finally slipped below 0.73 and currently buys 0.7289 US cents. Having broken a number of key technical supports, the AUD has entered a bearish channel and in the absence of a solid and sustained rebound in risk sentiment, could extend through 0.72 and toward supports at 0.7170. Our attentions today remain with the risk narrative and broader USD performance, with little on the macroeconomic ticket to drive direction.

Key Movers

The US dollar maintained its upward momentum through trade on Thursday as investors continue to drive rate hike expectations, following Wednesday's surprise CPI release. The dollar index extended beyond the September high marking a fresh year to date peak, as investors brush off last weeks dovish Fed commentary and instead focus on real world indicators, fully pricing in a July 2022 rate hike. As expectations for tighter monetary policy firm, the USD continued its advance against the yen, punching back through 114 and poised to extend gains toward levels not seen since Q1 2017. The euro slipped below 1.1450, while the GBP plunged below 1.34 and 1.3350. Our attentions turn now to commentary from key central bank officials. ECB Chief economist Philip Lane And New York Fed President John Williams hit the wires. We are keenly attuned to any comments from Williams in particular that suggest the Fed may be wavering in its commitment to accommodative monetary policy.

Expected Ranges

  • AUD/USD: 0.7170 - 0.7330 ▼
  • AUD/EUR: 0.6320 - 0.6390 ▼
  • GBP/AUD: 1.8270 - 1.8420 ▲
  • AUD/NZD: 1.0350 - 1.0420 ▲
  • AUD/CAD: 0.9080 - 0.9220 ▲