AUD marks new 2023 low as US data surprises and China worries continue
Daily Currency Update
The Australian dollar continued its precipitous downward spiral Friday, overwhelmed by a broadly stronger US dollar and ongoing Chinese economic uncertainty. US PPI data unexpectedly edged higher, propelling US yields upward as markets prepare for the possibility of one more Fed rate hike; a stark contrast to comments from outgoing RBA Governor Philip Lowe. While Lowe offered little beyond the recent statement of monetary policy it is clear the RBA hopes it has done enough to control inflation affording more flexibility in policy adjustments moving forward. With China data showing a steep decline in bank lending mounting more pressure on the embattled housing market and the AUD gave up 0.3% on the day and 1.1% for the week, sliding below US$0.65 to mark lows at US$0.6486.The stronger US dollar and softer Chinese Yuan are affording the AUD a few favours and our attentions turn now to Key Chinese Industrial Production data and the domestic quarterly wage price index as key markers for direction through the first half of the week.
Key Movers
The US dollar advanced against most counterparts Friday, buoyed by a stronger than anticipated US PPI report. Data for July showed producer price pressures increased 0.3%, a tenth of a percent faster than anticipated, meaning annual inflation remained steady at 2.4%. Analysis suggests the increase in producer costs has been driven by the services sector with labour costs and input goods costs flat across the month. With US consumer sentiment stable the uptick in leading inflation data helped propel US yields upward, dragging the US dollar higher across the board. The Euro slipped below 1.10, while the Yen broke key Psychological supports at 145 and now sits just below the June high. Ongoing and sustained JPY weakness will likely invoke action from Japanese policy makers. Officials have shown a penchant for intervention at these levels and skirmishes designed to support the beleaguered Yen will hardly surprise market participants. With most majors struggling against the stronger dollar backdrop the GBP outperformed. UK yields rallied following stronger than anticipated Q2 GDP data. An uptick in quarterly GDP growth lifted expectations for the terminal Bank of England base rate, suggesting policy makers will lift rates by a further 50 basis points across two more rate hikes. The promise of higher yields and easing growth concerns helped drive GDP gains across the board with Stirling making new three year highs against the AUD and NZD.Expected Ranges
- AUD/USD: 0.6450 - 0.6580 ▼
- AUD/EUR: 0.5900 - 0.6000 ▼
- GBP/AUD: 1.9480 - 1.9820 ▲
- AUD/NZD: 1.0780 - 1.0900 ▲
- AUD/CAD: 0.8700 - 0.8800 ▼