Daily Currency Update

The sell off across risk assets and equities continued through trade on Thursday dragging the AUD through supports and toward 0.70 US cents. Markets continue to digest Fed Chair Jerome Powell’s hawkish update offered in the wake of this week’s FOMC meeting, driving near term rates higher and fueling a sustained USD extension. The Aussie dollar has been the hardest hit, giving up 0.7180 to touch intraday lows at 0.7030, a 1.9% correction. Investors appear content in ignoring the majority of macroeconomic data sets as US interest rate and Fed policy expectations continue to drive direction. Having broken supports at 0.7090 the AUD remains horribly exposed, with the door now open for a correction through 0.70. Momentum remains firmly behind the US dollar and as investors continue to price in increasingly aggressive monetary policy adjustments, the AUD will likely remain under pressure. Our attentions remain with short term rates and FOMC policy expectations ahead of next week’s RBA policy update.

Key Movers

The US dollar maintained its momentum through trade on Thursday with no major counterpart immune to the surge in demand for the world’s base currency. While commodity sensitive currencies have born the brunt of this week’s correction, the euro, GBP and JPY have all suffered steep and aggressive downward corrections. The euro, having traded above 1.14 just two weeks ago, plunged below 1.12 marking intraday lows at 1.1139, while the pound collapsed through 1.34 testing lows at 1.3370. Even the yen wasn’t immune from the broader USD push, giving up 115 and now firmly on track to test new year lows above 116. Our attentions remain affixed to short term rate performance, while US quarterly employment costs will provide a key insight into US wage inflation. Sustained wage growth is an important factor driving Fed policy decisions, meaning there is ample scope for ongoing volatility into the weekly close.

Expected Ranges

  • AUD/USD: 0.6980 – 0.7130 ▼
  • AUD/EUR: 0.6270 – 0.6350 ▼
  • GBP/AUD: 1.8880 – 1.9150 ▲
  • AUD/NZD: 1.0650 – 1.0720 ▲
  • AUD/CAD: 0.8900 – 0.9020 ▲

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