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AUD extends recovery amid positive shift in sentiment

Tuesday 24 May, 2022

Daily Currency Update

A positive shift in sentiment has helped lift the AUD through 0.71 US cents to touch highs just shy of 0.7125 overnight. There is no obvious catalyst for the pivot in sentiment as a mixture of both positive and negative newsflow continues to disrupt normal market activity. Key equity indices rallied through trade on Monday dragging the AUD higher and safe haven currencies lower. The USD continued last weeks correction giving up ground amid rising growth concerns. The AUD found added support following a correction in USD/CNY. Despite reports Beijing recorded 99 new Covid 19 infections, a number of which are the result of increased community transmission the CNY found support following commentary from US president Joe Biden. Biden suggested the US would look to remove some of the import tariffs currently in place on Chinese goods in an effort to ease inflationary pressures. Added CNY support came on the heels of reports from Chinese Government officials affirming a commitment to an incremental easing of policy and new tax reliefs to help support businesses through sustained lockdowns. The stronger CNY provide welcome relief to the AUD. With the Federal Election behind us and no real impact felt across AUD value our attentions turn back to growing inflationary pressure and central bank policy guidance for direction through the week ahead.

Key Movers

Safe Haven Currencies underperformed through trade on Monday amid a shift in risk sentiment. Key equity indices climbed higher as the USD, JPY and CHF all shifted lower. The USD extended last weeks downward correction with the DXY USD index down 1% on the day. Last week, concerns surrounding the US growth outlook forced investors to review expectations for Fed policy while this weeks positive shift in risk sentiment drove investors away from haven assets. The Euro surged through 1.06 and 1.0650 falling short of a break above 1.07 while the GBP eyed a break above 1.26. Having witnessed a number of false starts we are keenly attuned to any further USD downside as a key marker of a broader shift in sentiment. Markets have been long USD for some time and a correction to the mean is probably warranted. Our attentions today turn to a slew of PMI data points across the US, UK and Europe.

Expected Ranges

  • AUD/USD: 0.6980 - 0.7120 ▲
  • AUD/EUR: 0.6620 - 0.6720 ▲
  • GBP/AUD: 1.7580 - 1.7780 ▼
  • AUD/NZD: 1.0950 - 1.1050 ▼
  • AUD/CAD: 0.9050 - 0.9130 ▲