Home Daily Commentaries Global recession fears keep AUD hovering near two-year lows

Global recession fears keep AUD hovering near two-year lows

Monday 11 July, 2022

Daily Currency Update

The Australian dollar hit two-year lows last week as commodity prices continued to tumble on fears China, the world’s second-biggest economy will fall into recession. On Friday the AUD finished 0.24% higher despite the Iron ore price falling again on Friday as mills in the northwest and southwest of China started to reduce their output to wait on future infrastructure spending. With a lack of data during the domestic trading session, the unfortunate news of former Japanese prime minister Shinzo Abe’s death while campaigning for a parliamentary election sent shockwaves through financial markets and a flight to safe-haven currencies. Eventual lows for the AUD/USD were seen at 0.6791 post-non-farm payroll numbers in the United States before a recovery to 0.6853. With little on the agenda today domestically, investors look towards Tuesday’s Westpac Consumer Sentiment release and NAB Business Confidence levels. The Australian dollar opens this morning at 0.6850. We expect support levels to hold onto moves approaching 0.6790 while any upward push will likely meet resistance at the 69 US cent handle.

Key Movers

Non-Farm Payroll data was positive on Friday night, increasing by 372,000 jobs and ahead of expectations, indicating the job market is still strong despite fears of a recession into 2023. The headline unemployment rate was also steady at 3.6% for the fourth straight month in a row. Wage growth more importantly continued to grow strongly at 5.1% for average hourly pay suggesting a 50bps interest rate rise is a sure thing at the next FOMC meeting on the 27th of July and priced in at 93% in the latest reading on the CME Fedwatch Tool. The US Dollar Index (DXY) was slightly lower on the day (-0.13) despite hitting 20-year highs this week closing at 106.90. The Dow finished 0.15% lower, as treasury yields rose following the stronger than expected jobs print. Brent Crude finished 2.3% higher to $107 a barrel. Elsewhere in the United Kingdom Boris Johnson officially resigned as the UK Prime Minister. The Great British pound rose slightly following the news, hitting 1.2050 before trading flat on the day, closing at 1.2027. The EUR/USD remains under pressure despite finishing 0.3% higher to 1.0186. Despite the assassination of former Prime Minister Shinzo Abe on Friday, Japan forged ahead on Sunday with its House of Councillors elections as the Liberal Democratic Party (LDP) looks to shore up a winning majority as 124 upper house seats are elected in the upper house. The greenback finished 0.06% higher against the Yen on Friday (1.3604).

Expected Ranges

  • AUD/USD: 0.6790 - 0.6900 ▲
  • AUD/EUR: 0.6700 - 0.6760 ▲
  • GBP/AUD: 1.7300 - 1.7750 ▼
  • AUD/NZD: 1.1020 - 1.1100 ▼
  • AUD/CAD: 0.8800 - 0.8900 ▼