AUD steady despite concern surrounding China’s GDP outlook

Daily currency update

Despite a surge across key equity indices and uptick in risk sentiment, the AUD remained largely range bound through trade on Thursday tracking between supports at 0.7050 and resistance at 0.7110. Stronger than anticipated earnings reports for key US retailer Macy’s, helped bolster demand across equity markets, dampening fears of a marked correction in the US growth outlook. The S&P 500 and the Nasdaq both charged higher, yet failed to spur activity across other financial assets, with bonds and currencies largely flat on the day. Having tested a break above 0.71, the AUD shifted toward intraday lows amid sustained concerns surrounding China’s growth outlook. The Chinese yuan fell near 1% on the day, with the USD extending back toward 6.75 as markets revise expectations for GDP. While Shanghai schools re-open after a 3-month lockdown, there are fresh fears Beijing is on the precipice of an extended lockdown, as community transmitted cases continue to emerge in new pockets across the city. Having touched intraday lows at 0.7059, the AUD found support through the overnight session. Our attentions turn now to domestic retails sales data ahead of US trade data, personal income and spending reports, consumer sentiment, and PCE deflator data for direction leading into the weekly close.

Key movers

Price action across commodity currencies was largely muted through trade on Thursday as a surge across US equities failed to spill into other financial assets. The USD edged lower against most counterparts while the euro outpaced the competition, extending back above 1.07 to touch intraday highs at 1.0730. Markets continue to react to the ECB’s recent hawkish pivot, adjusting expectations for monetary policy change as we move toward H2. A slew of commentary from ECB officials suggest the bank is poised to move away from its negative rate setting and issue at least a 50-basis point adjustment leading into year end. Having touched intraday highs at 1.0730, the single currency tracked between 1.0710 and 1.0730 leading into this morning’s open. Our attentions today turn to key US growth markers and changing energy prices. Rising oil and natural gas prices remain a concern and will play a significant role in determining near term inflation outcomes. A sustained uptick in energy prices will all but guarantee price pressures across non-discretionary consumer items remain elevated.

Expected ranges

• AUD/USD: 0.7020 – 0.7120 ▼
• AUD/EUR: 0.6580 – 0.6680 ▼
• GBP/AUD: 1.7650 – 1.7850 ▼
• AUD/NZD: 1.0930 – 1.1050 ▲
• AUD/CAD: 0.9040 – 0.9120 ▲