Home Daily Commentaries AUD outpaced by major counterparts as labour market underperforms and risk appetite wavers

AUD outpaced by major counterparts as labour market underperforms and risk appetite wavers

Friday 20 January, 2023

Daily Currency Update

The AUD underperformed through trade on Thursday testing a break below US$0.69 amid a backdrop of weaker risk appetite and heavy news flow. Softer than anticipated domestic labour market data dragged the AUD downward through the domestic session as investors second guessed expectations that the robust labour market activity will allow the RBA to sustain multiple interest rate hikes through H1. A contraction in new employment opportunities through December and a stable unemployment rate drove the AUD toward session lows below US$0.69 touching US$0.6890. The downturn continued into offshore trade as weaker risk sentiment added more downward pressure. Concerns surrounding the US economic outlook drove the risk-off shift, pushing equities lower, treasury rates higher, and the AUD toward intraday and weekly lows just north of US$0.6870. Having found support, the AUD tracked higher into this morning’s open and currently buys US$0.6920. Our attentions now turn to commentary from key Fed policy makers as the headline ticket guiding direction into the weekly close.

Key Movers

The Japanese yen outpaced major counterparts on Thursday, buoyed by a backdrop of falling global rates and elevated risk aversion. With the yen pushing the USD below 128, and the euro and GBP enjoying a small uplift, the Dollar index fell on the day, down 0.33%. The euro continues to track between 1.0750 and 1.09, while sterling looks set to test a break above 1.24 having touched session highs at 1.2390. Growing concerns the US is on the brink of economic recession has absorbed market attentions, weighing on risk demand and dampening US rate expectations. A further decline in US housing starts and building permits, coupled with an uptick in Jobless claims, have added to softer data sets already printed this week and elevated calls for the Fed to slow the pace of rate hikes in a bid to cushion the economic impact. Our attentions turn now to commentary from key Fed policy makers, while Japanese CPI will provide a key marker for future Bank of Japan policy action. December CPI is expected to lift to 4%, a fresh multi-decade high and will only serve as a reminder to markets of the absurdity of the BOJ yield curve controls and ultra-easy policy stance.

Expected Ranges

  • AUD/USD: 0.6850 - 0.7020 ▼
  • AUD/EUR: 0.6350 - 0.6450 ▼
  • GBP/AUD: 1.7780 - 1.8020 ▲
  • AUD/NZD: 1.0740 - 1.0850 ▲
  • AUD/CAD: 0.9050 - 0.9380 ▼