Daily Currency Update
Price action was choppy through trade on Thursday amid rising uncertainty and risk aversion. The AUD continued Wednesday night’s treasury-led sell off through the domestic session, extending the move below US$0.63 to new 2023 lows at US$0.6270. RBA Governor Michelle Bullock refused to be drawn on the implications of Wednesday’s CPI print when addressing the Senate Economics Committee, a reasonable stance given the RBA has not yet updated its forecast, but nevertheless created greater uncertainty surrounding the domestic rate outlook. Bullock has adopted a hawkish tone since stepping into her role as RBA Governor, elevating expectations for a possible November rate hike. The upturn in local rate expectations has done little to help support the AUD and direction continues to be driven by offshore stimuli. Having plumbed new lows, the AUD then found support overnight amid a downward correction in US yields. While US headline Q3 GDP beat expectations, a deep dive into the data suggests a softening in growth expectations moving through Q4. US yields were down across the curve dragging the USD lower and allowing the AUD to punch back through US$0.63 and toward intraday highs at US$0.6330. Despite a late USD rebound the AUD maintained its own recovery into this morning’s open and our attentions turn now to US PCE inflation data and consumer sentiment for direction into the weekly close.
Key Movers
Treasury yields, rate expectations and risk sentiment drove direction on Thursday, with the USD index flat despite a downward correction in 2- and 10-year rates. The euro is marginally lower after the ECB left rates on hold at 4%. With the result largely priced in, attentions moved to the accompanying statement which offered little by way of contrast to the September update, noting “interest rates are at a level that, if maintained for a sufficiently long duration, will bring inflation back to target.” This statement reinforced market expectations the tightening cycle is over, opening the door for a widening in the gap between US and Eurozone yields. The single currency slipped toward intraday lows at 1.0525 before finding support in lower US yields and pushing back above 1.0550. In other news the USD/JPY traded erratically yet held above 150. Investors are nervous after a previous move above this level prompted the Bank of Japan (BoJ) to intervene, while comments from Finance Minister Suzuki did little to calm sentiment. Suzuki noted that “we are watching FX moves with the same sense of urgency.” Our attentions are now squarely affixed to next week's BoJ policy meeting. While officials may choose to intervene beforehand, longer run BoJ policy and policy expectations will be key in controlling USD/JPY fortunes through the end of the year.
Expected Ranges
- AUD/USD: 0.6270 - 0.6380 ▲
- AUD/EUR: 0.5920 - 0.6020 ▲
- GBP/AUD: 1.9000 - 1.9400 ▼
- AUD/NZD: 1.0800 - 1.0900 ▼
- AUD/CAD: 0.8670 - 0.8820 ▲