Home Daily Commentaries AUD under pressure amid growing risk aversion

AUD under pressure amid growing risk aversion

Daily Currency Update

The Australian dollar has continued edging lower, weighed down by a souring in risk sentiment and a broadly stronger US dollar. Aversion to risk increased through trade on Tuesday amid ongoing concerns surrounding China’s economic health and fears the US government will be thrust into shutdown come midnight on Saturday. While a stop-gap funding bill has been announced policy makers are yet to agree on a deal that will allow government funding to continue opening the door to a possible widespread US government closure. Equity prices continued to fall through Tuesday as treasuries and bonds maintained their momentum. With investors chasing haven assets the AUD slipped below US$0.64 marking intraday and overnight lows at US$0.6390 before finding support.
Our attention now turns to August CPI numbers. We anticipate rising fuel costs will mean headline inflation remains comfortably above 5%. Data linked to rising service costs will be key in shaping the inflation narrative moving forward.

Key Movers

The US dollar extended its upward run through trade on Tuesday amid elevated risk aversion. The DXY index jumped another two-tenths of a percent as commodity currencies endure ongoing pressure amid falling metal prices and ongoing China concern while the GBP and euro remain under the pump. The GBP fell to its lowest level in 6 months while the Japanese yen hit a near 12-month low giving up ¥149 while the euro continues to trade below US$1.06 marking lower lows. A broad risk-off tone and growing concern for the global growth outlook have pushed investors toward haven assets. This coupled with the surge in bond and treasury prices and the sell-off across equity markets and demand for the USD has lifted. While there are growing fears US lawmakers will fail to agree on an 11th-hour deal to continue government funding, news of a stop-gap measure to see the government through the next 4-6 weeks has eased some fears. At this stage, the market fully expects a deal will be reached and currently the narrative of uncertainty is only adding to the broader risk-off narrative.
Our attention now turns to the US durable goods orders as the only headline item on the day's macroeconomic agenda.

Expected Ranges

  • AUD/USD: 0.6380 - 0.6450 ▼
  • AUD/EUR: 0.5980 - 0.6080 ▼
  • GBP/AUD: 1.8880 - 1.9120 ▼
  • AUD/NZD: 1.0700 - 1.0800 ▼
  • AUD/CAD: 0.8620 - 0.8720 ▲