AUD slips as risk aversion envelopes market
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Daily Currency Update
The Australian dollar shifted lower through trade on Thursday as a risk off mood engulfed markets and propped up the US dollar. Domestic employment data showed the labour market is still incredibly resilient in the face of rising cost of living pressures and elevated interest rate expectations. An uptick in the unemployment rate was offset by a larger than anticipated jump in jobs growth through June and an uptick in the participation rate and population growth. Overall, employment conditions remain stable and offered little incentive for the RBA to deviate from its current path. We still anticipate policy makers will maintain the current policy setting through 2024, with an outside risk of a potential rate hike in August. The possibility of higher yields for longer was not enough to foster an AUD rebound and the dollar slipped toward US$0.67, before finding support.Having approached US$0.68 late last week, the AUD has marked a series of lower lows and lower highs this week. Our attentions turn to commentary from key Fed officials and broader market risk tolerance for direction into the weekly close.
Key Movers
A risk off mood enveloped markets through trade on Thursday allowing the USD to retrace Wednesday’s downturn, as treasury yields edged higher and equities fell. The DXY dollar index jumped 0.4% on the day advancing against all major counterparts. With US treasury yields higher, the Japanese yen gave up three quarters of one percent, while the euro eased back below 1.09 and the GBP gave up 1.30. Markets seemed content in ignoring the ECB policy meeting after officials confirmed the Bank was leaving rates unchanged. The decision to not adjust rates for a 2nd consecutive month was widely expected and with messaging surrounding future hikes unchanged, ECB pricing expectations were little moved. With no obvious catalyst for the latest risk off move, our attentions turn now to Japanese Core CPI data, UK retails sales, German PPI numbers and Canadian retail sales, while commentary from Fed members Williams and Bostic will provide some colour into the weekly close.Expected Ranges
- AUD/USD: 0.6680 - 0.6750 ▼
- AUD/EUR: 0.6120 - 0.6220 ▲
- GBP/AUD: 1.9100 - 1.9400 ▼
- AUD/NZD: 1.1050 - 1.1150 ▲
- AUD/CAD: 0.9150 - 0.9250 ▼