AUD finds short reprieve, but forecasts point to further depreciation ahead
Wednesday 12 October, 2022
Daily Currency UpdateAfter a tumultuous start to the week price action across currency markets has stabilised and the AUD found support having marked fresh lows below US$0.6250. Risk sentiment improved throughout trade on Tuesday after the Bank of England extended its emergency gilt buying program to include inflation linked gilts. Dysfunction within the gilt market afforded policymakers little choice but to step in a restore order. The AUD climbed back through US$0.63 marking intraday highs at US$.6350 before shifting lower again amid sustained uncertainty. Having given up US$0.63 the AUD opens at US$0.6273 this morning. With little of note on today’s domestic macroeconomic ticket, our attentions turn to UK GDP, EURO Industrial Production, and US Producer Production data ahead of key commentary from BoE, ECB, and US central bank policymakers. With all eye on the UK and what will happen when the Bank of England removes its emergency backstop this Friday. Fluctuations in the risk narrative and sustained risk aversion will continue to steer direction and ensure the AUD remains under pressure. Having marked a series of lower lows through the last 2 weeks we are now eyeing a break toward 0.62 as the next critical marker of support.
Key MoversAn improved risk backdrop forced the US dollar lower through trade on Tuesday driving the DXY dollar index half a percent lower. The Bank of England’s intervention in the Gilt market helped ease fears amid elevated dysfunction and rising yields. The GBP climbed to 1.1175 before a sharp decline in the latter stages of the overnight session sees it trading back below 1.10. The Euro and JPY followed a similar path rallying early before giving up gains through the back end of the day. While risk aversion had been tempered there is still a great deal of uncertainty across financial markets with the BoE set to remove its emergency backstop on Friday. With so much uncertainty surrounding the future of Chancellor Kwarteng’s min-budget proposal and performance a ross gilt markets, we anticipate price action will remain elevated through the coming days as investors adjust positions and digest key US inflation and consumer sales data. Further depreciation in the risk narrative driven by UK uncertainty and sustained US inflation pressures could see the dollar test September highs driving major counterparts toward new lows.
- AUD/USD: 0.6220 - 0.6350 ▼
- AUD/EUR: 0.6380 - 0.6520 ▼
- GBP/AUD: 1.7320 - 1.7680 ▼
- AUD/NZD: 1.1180 - 1.1320 ▼
- AUD/CAD: 0.8620 - 0.8720 ▼