Home Daily Commentaries AUD tripped up as new ranges form

AUD tripped up as new ranges form

Daily Currency Update

The Australian dollar retreated through trade on Thursday giving up US$0.68 in the face of broad based US dollar gains. Price action was largely muted and the AUD maintained a well defined range through much of the day, tracking between US$0.6760 and US$0.6805 before more yuan selling spilled into AUD values and forced a break below US$0.6750. Concerns surrounding the China growth outlook and its tepid monetary and fiscal policy response continue to weigh on investors, driving the yuan to fresh lows and dragging the AUD down as selling proxy. With the AUD under pressure, a deeper risk off push forced the currency toward intraday lows at US$0.6745. The Bank of England surprised investors by issuing a larger than anticipated 50-point rate hike. With growth and stagflation concerns now outweighing yield returns, fears a global recession is rapidly approaching weighed on risk demand. Despite GBP softness the AUD was unable to capitalise, slipping back below £0.53, while giving up ground against a host of other major counterparts.

Our attentions turn now to Japan’s latest CPI report, global PMI data and commentary from a number of key Federal Open Market Committee board members.

Key Movers

The Japanese yen has been the days big mover, plunging across the board amid further divergence in Bank Of Japan and other Central Bank policies. The Bank of England surprised investors by issuing a larger than anticipated rate hike. Against a backdrop of higher inflation and a robust labour market, policy makers elected to lift rates by 50 basis points in a bid to avoid a vicious wage price spiral. While the GBP enjoyed an immediate boost it was unable to sustain gains as growth concerns outweighed the impact of higher rates on UK yields, forcing the GBP back below 1.2750. With the BoE cash rate at 5% and expected to reach 6%, and Fed Chair Jerome Powell postulating at least one more FOMC rate hike the Bank of Japan’s ultra easy policy stance stands out even more. The yen fell against the USD with the dollar punching above 143, while the Swiss franc moved above record highs not seen since 1979. The yen is now approaching intervention territory and we wouldn’t be surprised if we see a combined Ministry of Finance and BoJ announcement in the wake of today’s CPI update. Our attentions remain affixed to the Japanese yen and the latest CPI inflation report, while Global PMI data and Fed commentary shape direction into the weekly close.

Expected Ranges

  • AUD/USD: 0.6720 - 0.6850 ▼
  • AUD/EUR: 0.6120 - 0.6220 ▼
  • GBP/AUD: 1.8750 - 1.9050 ▲
  • AUD/NZD: 1.0880 - 1.1020 ▼
  • AUD/CAD: 0.8850 - 0.8950 ▼