Home Daily Commentaries AUD recovers amid softer US and European growth outlooks

AUD recovers amid softer US and European growth outlooks

Daily Currency Update

The Australian dollar rallied through trade on Wednesday, extending back through US$0.6450 amid weaker global PMI data. Both US and European PMI surveys measured below market expectations and point to a larger than anticipated contraction in global economic activity. Bond yields retreated in response to the weaker print, while equities and risk assets found support as markets pared back expectations for tighter monetary policy. Against this backdrop, the AUD outperformed its major counterparts rallying off intraday lows at US$0.6410 to mark highs just above US$0.6480, its highest level in little over a week. Having seemingly found support on moves approaching US$0.6380, our attentions now turn to US jobless claims and good orders on an otherwise quiet macroeconomic ticket while China headlines continue to dominate the broader risk narrative.

Key Movers

Treasury yields dipped through trade on Wednesday, after PMI data raised fears the global growth outlook is softening. European PMI data measured well below expectations, led by falls in Germany and France as German manufacturing activity retreated for a seventh consecutive month. As interest rates continue to rise, consumer sentiment is faltering, weakening demand and forcing investors to correct expectations for future central bank policy adjustments. Analysts pared back European Central Bank (ECB) rate hike prospects pricing in just an 8-basis point adjustment, down from 14, where it started the week. The Euro fell through 1.0850 marking intraday lows marginally above 1.08 before US yields followed European rates lower, forcing the USD to give up early gains. The Euro rebounded and the Yen outperformed while the GBP continued to bounce within a narrow trading handle.

Attentions turn now to US jobless claims. We expect little shift against last week’s print while goods orders offer an insight into future US activity.

Expected Ranges

  • AUD/USD: 0.6380 - 0.6530 ▲
  • AUD/EUR: 0.5880 - 0.6000 ▲
  • GBP/AUD: 1.9500 - 1.9990 ▼
  • AUD/NZD: 1.0780 - 1.0900 ▲
  • AUD/CAD: 0.8700 - 0.8850 ▲