Home Daily Commentaries AUD recovery continues as improved risk sentiment forces USD lower

AUD recovery continues as improved risk sentiment forces USD lower

Daily Currency Update

The Australian Dollar recovery continued though trade on Monday amid a sustained improvement in risk sentiment. In the absence of headline domestic data, the AUD tracked sideways for much of the local session, bouncing between 0.6830 and 0.6850 before surging toward intraday highs just shy of 0.69 US cents. Markets appetite for risk has risen through the last week, helping the AUD stave off a break below 0.67 US cents and mount a recovery, edging slowly back toward 0.69. A fall in European gas prices, coupled with reports Ukrainian forces have forced Russian troops to retreat in the countries north-east and expectations US inflation pressures are beginning to ease have fostered renewed demand for risk assets and helped drive AUD upside.

With little of note on today’s ticket our attentions turn to tonight’s all-important US CPI print. A sustained contraction in US price pressures should further ease Fed policy expectations and prompt further USD weakness.

Key Movers

The carry over in improved risk sentiment has prompted a deeper USD correction with the DXY index giving up another half percent as the Euro and GBP outperformed. The dollar has given up over 2% since peaking last week while the Euro pushed back through parity and the GBP has bounced off lows to eye a break back above 1.17. The election of new PM Liz Truss and the announcement of a new and robust energy rescue bill have helped ease concerns UK’s inflation crisis could exceed 20%. The decline in European gas prices and the Retreat of Russian Troops in the North East of the Ukraine has helped fuel demand for risk assets and drive a broader USD correction.

Our attentions turn now to US CPI inflation data. While a 75 point hike seems all but locked in for this months Fed policy update a surprise to the downside could impact expectations moving into October and likely weigh on the recent USD correction, while sustained inflation pressures will afford the policy makers ammunition to extend its aggressive path of interest rate adjustment into the end of the year.

Expected Ranges

  • AUD/USD: 0.6830 - 0.6930 ▲
  • AUD/EUR: 0.6750 - 0.6850 ▲
  • GBP/AUD: 1.6880 - 1.7020 ▼
  • AUD/NZD: 1.1150 - 1.1250 ▲
  • AUD/CAD: 0.8880 - 0.9020 ▲