AUD slides as debt ceiling and weaker Chinese growth hang over markets
Wednesday 24 May, 2023
Daily Currency UpdateThe Australian dollar underperformed through trade on Tuesday, sliding toward supports at US$0.66 amid a weaker risk backdrop. Ongoing debt ceiling negotiations continue to hang over the market dampening demand for risk assets and driving equity indices lower. The AUD slipped off intraday highs north of US$0.6655 marking intraday lows just below US$0.6610 as risk appetite losses were compounded by renewed concerns China's post-COVID rebound will continue to slow. With the yuan sustaining further losses against the USD the AUD, a proxy among major currencies, suffered. Concerns about China's weak industrial production growth post-COVID have prompted a steep correction in industrial metals with copper leading the downturn slumping 11% through the last month. While down six-tenths of a percent the AUD still sits within well-defined ranges as our attentions turn to the RBNZ policy meeting, key UK CPI data and the FOMC's meeting minutes for direction through trade on Wednesday.
Key MoversThe USD was broadly stronger Tuesday as ongoing debt ceiling negotiations continue to hang over the market and dampen demand for risk. While President Biden noted talks were "productive" House Speaker McCarthy countered suggesting the two sides were "not anywhere close" to agreeing on a deal. Despite the variance in opinion, both sides appear confident a compromise can be reached by June 1st and the market it seems shares this optimism. Equities are lower and yields little changed on the day while the USD DXY index climbed 0.3% as the euro slid below US$1.08 and the pound poked its head below US$1.24 before finding support.
Our attention today turn to UK CPI data and the FOMC's meeting minutes. With consensus for UK inflation to show the beginnings of a steep decline in coming months tonight's print is crucial in governing Bank of England rate expectations and shaping near-term GBP value.
- AUD/USD: 0.6580 - 0.6720 ▼
- AUD/EUR: 0.6080 - 0.6180 ▼
- GBP/AUD: 1.8620 - 1.8880 ▲
- AUD/NZD: 1.0520 - 1.0720 ▲
- AUD/CAD: 0.8880 - 0.9020 ▼