Australian dollar falls 0.47% after bears take control
Thursday 18 November, 2021
Daily Currency Update
AUD - Australian Dollar
The Australian dollar continued its downward descent, falling 0.47% overnight to open this morning at 0.7265 despite a rather benign global market. Markets generally consolidated overnight with barely any changes in equity markets and only a slight sell-off in US Bond rates. Furthermore, the US Dollar Index fell marginally by 0.12% which stands in stark contrast to its move higher against the Australian dollar.
Ultimately, it was the perfect storm that conspired to force the Australian dollar lower. Dovish RBA rhetoric was firstly reinforced yesterday when the Wage Price Index Q/Q came in exactly as expected at 0.6%. While wage growth is a lagging indicator, the RBA have repeatedly linked rate hikes to persistent, strong wage growth. Given the lack of an upside surprise in yesterday’s wage report, the market has started to reposition itself away from its inflation-linked bet against the RBA which hence the Australian dollar was forced lower. Adding fuel to the fire was the UK CPI inflation reading that came in well above expectations. Reports of inflation globally have galvanised markets and contributed to flows away from currencies linked to dovish central banks, such as the Australian dollar.
Moving into Thursday, there is little on the economic calendar to digest except a speech from RBA Assistant Governor Luci Ellis speaking at the Committee for Economic Development of Australia.
Key MoversThe Great British pound takes out the key mover spot overnight as their CPI report came in well above expectations and forced the pound up 0.48% to open at 1.3491 against the US dollar. The year-on-year CPI measurement reported a reading of 4.2% against an expected 3.9% which also cemented expectations of a rate hike cycle beginning next month. Furthermore, the market is pricing in over 100BPS of rate hikes into the curve over the next 12 months.
On the opposite end of the spectrum however is the Turkish lira, which again finds itself languishing on the brink of a currency crisis. The lira has fallen as much as 3.7% overnight and as much as 28% over the year as the central bank has again cut rates despite rampant inflation. The central bank has cut its key rate 300BPS since September while Inflation has risen to nearly 20%.
- AUD/USD: 0.9105 - 0.9214 ▼
- AUD/EUR: 0.6377 - 0.6455 ▲
- GBP/AUD: 1.8456 - 1.8680 ▲
- AUD/NZD: 1.0315 - 1.0440 ▼
- AUD/CAD: 0.7221 - 0.7308 ▼