AUD finds support as risk appetite buoyed by resurgent Chinese economy
Thursday 2 March, 2023
Daily Currency UpdateThe Australian dollar enjoyed mixed fortunes through trade on Wednesday amid a contrasting mix of softer domestic macroeconomic data sets and improved risk appetite, following stronger Chinese economic indicators. Both Q4 GDP and CPI data significantly undershot expectations on Wednesday, driving the AUD below US$0.67 as investors scrambled to adjust rate expectations. Seemingly poised to consolidate the break the AUD then found support and surged back through US$0.6750 following stronger than expected Chinese PMI data. China PMI’s were stronger across the board as the removal of COVID restrictions have helped foster a flurry of economic activity. Manufacturing activity led gains across the suite of PMI indicators, posting its largest increase in a decade. China’s improved post-COVID outlook helped drive a surge in risk demand, underpinning commodities and commodity currencies. The AUD was a primary benefactor of improved Chinese data up 0.5% on the day and our attentions turn now to European CPI data and US jobless claims for direction leading into Friday.
Key MoversThe US dollar fell through trade on Wednesday amid improved risk appetite and renewed European inflation woes. The dollar index moved 0.5% lower on the day as ISM manufacturing data indicated activity continues to contract, while employment activity slipped back into contractionary territory. The softer data contrasts a string of stronger data sets and cast a mild pall over renewed rate expectations. The Euro surged, up 0.8% and through 1.0650. Expectations for the Euro area CPI will prove sticky and offer an upside surprise jump following a 1% increase in German inflation through February. The stronger print sees annual inflation up 9.3% elevating expectations for tonight’s broader Euro Area CPI print. Elevated inflation expectations have driven European rates higher this week and helped underpin the single currency. The GBP offered little and after testing a break above 1.21 slipped back toward 1.20 under the weight of a widening in rate differentials and a weaker domestic economic outlook. Our attentions turn now to US jobless claims and European CPI data for guidance and direction through Thursday.
- AUD/USD: 0.6680 - 0.6820 ▲
- AUD/EUR: 0.6280 - 0.6320 ▼
- GBP/AUD: 1.7580 - 1.7920 ▼
- AUD/NZD: 1.0780 - 1.0920 ▼
- AUD/CAD: 0.9120 - 0.9230 ▲