AUD marks fresh 2-year low as global recession fears elevated
Daily Currency UpdateThe Australian dollar enjoyed ample price action through trade on Thursday, eyeing a break toward 0.68 US cents before falling steadily to mark fresh 2-year lows. The AUD climbed through 0.6750 and toward intraday highs following a robust labour market print. A surge in job creation and larger than anticipated decline in the unemployment rate helped propel the AUD higher, as investors rushed to adjust rate expectations. The unemployment rate fell to 3.5%, its lowest level in almost 50 years. When coupled with the recent surge in inflation, there is rising pressure on RBA policy makers to accelerate the pace of interest rate hikes. Sustained strength across the labour market prompted investors to back in a 75-basis point rate hike when the RBA next meets in August. The surge in action across the rates market trickled into currencies and helped the AUD touch 0.6784. The upturn however didn’t last long, and the AUD turned lower late in the domestic session, maintaining a downward bias through the early part of overnight trade. Markets' appetite for risk soured as investors regroup and fully digest yesterdays shockingly high US CPI report. Equities moved lower while key commodities, led by oil, fell forcing the AUD toward intraday lows at 0.6680. Having found support, the AUD edged back toward 0.6750 into this morning’s open, as commentary from Fed officials forced markets to pare back calls for a 100-basis point rate hike later this month.
The AUD continues to mark a series of lower lows and, as evidence by the muted response to yesterday's labour market report, will continue to find direction in broader global drivers. With little of note on today’s local ticket our attentions turn to Chinese activity data, US retail sales and consumer sentiment data for direction into the weekly close.
Key MoversThere was ample price action across major currencies through trade on Thursday with the euro again testing a break below parity, while the CAD gave up its post BoC gains and the GBP marked fresh 2-year lows. The USD remains firmly in charge, marking new highs as political uncertainty in Italy forced the euro to again test a break below parity. Reports Premier Draghi offered his resignation after Italy’s second largest party opted to boycott a confidence vote prompted a rapid uptick in Italian 10-year bonds and is the last thing the embattled euro needs. With the ECB attempting to manage elevated and sustained inflation against the lacklustre growth and fears of recession, Italian political uncertainty and surging bond rates provide just another hurdle, adding pressure on the ECB to offer greater transparency on its anti-fragmentation tool designed to protect bond rates in southern European states. The euro plunged to intraday lows at 0.9950 before finding support.
The Canadian dollar was the day’s worst performer giving up gains won in the wake of the BoC’s 100-point rate adjustment, collapsing under weaker oil prices. Brent crude fell as much as 5%, as recession fears continue to rise following a report US gasoline demand has fallen to its lowest level in nearly 30 years.
With the GBP touching 2-year lows below 1.18 and the yen giving up a move above 139, our attentions turn to Chinese activity data, US retail sales and consumer sentiment data for direction into the weekly close.
- AUD/USD: 0.6650 - 0.6780 ▼
- AUD/EUR: 0.6680 - 0.6780 ▲
- GBP/AUD: 1.7420 - 1.7680 ▼
- AUD/NZD: 1.0980 - 1.1080 ▼
- AUD/CAD: 0.8750 - 0.8920 ▲