AUD falters after marking fresh 5 month high
Thursday 19 January, 2023
Daily Currency UpdateThe Australian dollar opens lower this morning despite marking fresh 5-month highs above US$0.7050 through trade on Wednesday. The AUD maintained a relatively narrow range through the domestic session tracking between US$0.6970 and US$0.70 as markets sidelined major bets leading into an all-important Bank of Japan policy meeting. Global rates fell after the BoJ refused to amend its ultra-easy policy stance and extend on its surprise move in December, helping lift demand for the AUD and other carry trade targets. The AUD pushed through US$0.70 and extended its upward foray amid a slew of weaker US macroeconomic data sets. Retails sales and industrial production both tracked lower while housing data remains consistent with poor conditions across the real-estate market. The downturn in key data sets was compounded by reports Microsoft and Bank of America will begin a series of job cuts, hiring freezes and layoffs in response to the changing economic environment. It appears clear the US is on the brink of recession, if not already engulfed in the early stages, and investors have begun adjusting expectations for Fed policy. Having touched intraday highs at US$0.7060 the AUD upturn faltered. A shift in risk demand drove a collapse across equities and risk assets forcing the AUD back below US$0.6950. Our attentions turn now to domestic employment data. With inflation stubbornly sticky the RBA will be keenly attuned to any shift in labour market trends. Sustained strength in hiring conditions could afford the RBA more scope to push through multiple rate hikes through the coming months as it works to control inflation pressures.
Key MoversRobust price action across major currencies was driven by a slew of macroeconomic data sets and key central bank policy announcements. The Bank of Japan opted to maintain its ultra easy monetary policy platform, despite growing market pressure to move away from an outdated and inappropriate policy of yield curve control. The stubborn stance drove a clean-out in long yen positions with the USD recouping recent losses before a slew of weaker than anticipated US macroeconomic data sets spurred another run of dollar weakness. A downturn in retail sales activity, industrial production and housing data, coupled with reports of cracks in labour market activity helped amplify calls the US has now tipped into economic recession. Equities dipped and expectations for Fed policy shifted amid a backdrop of lower global rates. Having given up ground early the promise of recession fostered an uptick in risk aversion propping up the USD through the latter half of the trading session. The Great British pound pushed above 1.24 as CPI data offer the Bank of England scope for pushing ahead with further 50 point rate hikes. While headline inflation fell core inflation printed above expectations and well above target. The downturn in headline data is encouraging and suggests the peak in price pressures may be behind us, however the stubborn uptick in core goods prices remains a concern for central banks and will likely steer an aggressive monetary policy approach through the near term. Our attentions today turn to commentary from key fed officials while ECB president Lagarde hits the wires.
- AUD/USD: 0.6880 - 0.7060 ▼
- AUD/EUR: 0.6380 - 0.6500 ▼
- GBP/AUD: 1.7520 - 1.7880 ▲
- AUD/NZD: 1.0750 - 1.0880 ▼
- AUD/CAD: 0.9320 - 0.9450 ▲