Home Daily Commentaries Risk appetite improves helping lift the AUD back above 0.69 US cents

Risk appetite improves helping lift the AUD back above 0.69 US cents

Daily Currency Update

The Australian dollar enjoyed a modest boost through trade on Wednesday tracking back toward US$0.6950 amid an improvement in appetite for risk. Stronger corporate earnings and a stout ISM services print helped lift key equity indices and dragged risk-correlated currencies higher. Having opened near the previous day's low at US$0.6920, the AUD sunk below US$0.69 amid reports US House Speaker Nancy Pelosi had touched down in Taiwan. The AUD marked intraday lows at US$0.6890 before climbing steadily through the back end of the local session and through overnight trade. With little of note on the domestic ticket today, our attentions remain on the broader risk narrative, while the bank of England Policy meeting affords an opportunity for the AUD to extend on recent gains against the GBP. Having broken back above £0.57 there is scope for the AUD to break toward £0.58. Markets are divided in pricing a 25- or 50-point hike as policymakers battle to control elevated inflationary pressures and lacklustre domestic economic performance. A lack of conviction from policymakers to date ensures there is ample room for market reaction.

Key Movers

Price action across majors was modest through trade on Wednesday with a small improvement in risk sentiment allowing commodity currencies to track higher and forcing haven assets lower. The JPY and CHF suffered notable downturns while the Euro and GBP failed to find momentum. The USD found support despite the risk-on move climbing against the EUR, GBP, and JPY. A stronger than anticipated ISM service print and more hawkish fed speak helped elevate rate expectations and lift treasury yields. Services data showed a surprise improvement, climbing to a 3-month high as new orders rose and supply side pressures eased signalling a potential softening in inflationary pressures.

Our attentions turn now to the Bank of England’s MPR policy meeting. The market is divided on whether policymakers will lift the rate by 25 or 50 basis points. While the consensus tilts toward a more aggressive policy move the monetary policy committee has offered mixed guidance in recent weeks suggesting division among policymakers. With the UK economy struggling to stimulate growth while controlling historical inflationary pressures there is ample scope for market reaction and volatility.

Expected Ranges

  • AUD/USD: 0.6880 - 0.7050 ▲
  • AUD/EUR: 0.6780 - 0.6880 ▲
  • GBP/AUD: 1.7380 - 1.7680 ▼
  • AUD/NZD: 1.0980 - 1.1120 ▲
  • AUD/CAD: 0.8880 - 0.8930 ▲