AUD continues to track lower amid growing concerns for global recession
Friday 29 April, 2022
Daily Currency UpdateThe Australian dollar downtrend continued through trade on Thursday, slipping below 0.71 US cents amid growing concern surrounding the global growth outlook. While equity markets enjoyed a modest improvement in risk sentiment, risk correlated currencies failed to see any upside risk-led flow as the AUD and NZD both tracked lower on the day. Headwinds to global growth are multiplying, heightening fears the global economy is teetering on the brink a recession next year. China’s lockdowns have all but crippled expectations for growth through Q2 and will likely spill into Q3, adding further supply chain issues and exacerbating global inflationary pressures. With commodity prices tumbling in recent weeks and markets adjusting positions ahead of tighter monetary policy conditions, the AUD has suffered a dramatic and swift correction. Having traded above 0.7650 in the wake of the April RBA policy meeting, the AUD touched intraday lows below 0.7060 overnight. With near term headwinds still in play, a reprieve in the recent sell off may be hard won. We continue to watch global rates, risk sentiment and monetary policy expectations for direction.
Key MoversIn assessing key movers through the last 24 hours we cannot ignore the collapse of the Japanese yen. The story of the day has been the Bank of Japan’s commitment to its current program of yield curve control, bucking the trend of global central bank tightening and doubling down on its uber accommodative monetary policy stance. Policy makers announced Yield curve control interventions would now be fixed at 0.25% on a daily basis, a clear signal it remains staunch on maintaining record low interest rates. Previously Yield Curve controls had only been employed when the market threatened to force a break above the Bank’s 0.25% tolerance threshold. Given the recent depreciation in the yen and the political pressure that’s accompanied it, there was some suggestion the BoJ would offer forward guidance hinting at a loosening in yield curve control and a provision for more upward movement in rates. The USD lurched higher following the meeting, surging through 130 for the first time in two decades, touching session highs above 131 at 131.25. With the BoJ continuing to battle deflationary pressures and policy makers committed to the current policy platform there is scope to suggest USD/JPY could enjoy further upside through the near term.
The USD index is stronger, marking new 20 year highs on the heels of the weaker yen and further euro and GBP softness. Despite some improvement in the risk narrative and only a modest uptick in rates when compared with European rates, the USD remains well bid and the preferred play for those chasing a higher yield return with the safety net of another risk off push.
Our attentions turn now to a host of key data sets. US labour costs and wage growth data headline the US, set while Euro Area CPI dominates the European session
- AUD/USD: 0.6980 - 0.7150 ▼
- AUD/EUR: 0.6680 - 0.6820 ▼
- GBP/AUD: 1.7480 - 1.7675 ▼
- AUD/NZD: 1.0880 - 1.0980 ▲
- AUD/CAD: 0.9020 - 0.9180 ▼