AUD marks new lows as fears China’s property market collapse will spread across the economy
Daily Currency Update
The Australian dollar plumbed new lows through trade on Wednesday, hamstrung by rising US treasury yields and more negative China news. Reports that Chinese authorities have requested investment funds avoid being net sellers this week amid rising concerns property market uncertainty will permeate the broader economy. News Zhongrong International Trust, one of China’s largest shadow banks, had missed several payments owing on investment products which elevated fears the crisis is spreading to the financial sector. The Yuan fell again against the USD and is now just short of the 2022 peak at 7.3280. The risk-off mood forced the AUD toward new 2023 lows at US$0.6416, consolidating a break below US$0.6450.With the AUD clearly on the back foot, our attentions turn to domestic labour market data. We expect jobs growth to have slowed and the unemployment rate to have edged higher, offering little reason for the RBA to move off its current stance. Excluding a print outside market expectations we expect today’s headline print to have little net impact on AUD value as focus firmly affixed to China headlines and the broader risk narrative.
Key Movers
The US dollar was stronger again through trade on Wednesday, advancing against most counterparts on the heels of rising US treasury yields and ongoing China concerns. US 10-year treasury yields rose to 4.26%, marking the highest daily close in 15 years, affording markets confidence the Fed will be able to adopt a measured approach in returning to a more accommodative monetary policy setting. With China concerns continuing to grab headlines, risk demand faltered, forcing investors toward safe haven assets and further extending US dollar gains. The Yen remains under pressure, giving up 146 for the first time in 10 months and while the Euro struggled the GBP edged upward, jumping 0.1% on stronger-than-expected inflation data. While headline inflation fell 1% through July, core inflation printed above expectations, driven by an uptick in service costs. With inflation still well above the Bank of England’s target range, the market is pricing a further 80 points of tightening, a full hike more than this time last week. With UK yields rising, the GBP is stronger across the board extending and marking fresh 3-year highs against the AUD and NZD.Our attentions turn now to Australian labour market data and US unemployment claims for direction Thursday.
Expected Ranges
- AUD/USD: 0.6380 - 0.6520 ▼
- AUD/EUR: 0.5880 - 0.5950 ▼
- GBP/AUD: 1.9620 - 1.9980 ▲
- AUD/NZD: 1.0780 - 1.0880 ▼
- AUD/CAD: 0.8650 - 0.8750 ▼