Daily currency update

The Australian dollar underperformed through trade on Wednesday, tumbling 1% and slipping back below US$0.6950 amid a surge in global bond rates and general risk-off shift. Having tracked sideways through the domestic session the AUD came under increased selling pressure overnight after UK CPI data showed a larger than anticipated increase in July. Annual headline inflation climbed through 10% as prices rose by 0.6% through the month of July. The sharp increase drove investors toward haven assets, propping up bond yields while weighing on equity markets and risk-sensitive currencies. Having touched intraday lows at US$0.6912 the AUD found some support following the release of the Fed’s FOMC meeting minutes. The minutes revealed policymakers expressed concern that elevated inflation pressures may become entrenched within the economy forcing the Fed to overtighten monetary policy, fostering a deeper economic recession. The dovish tone allowed the AUD to climb back toward US$0.6950. In other news, a downside surprise in Australian wage price growth triggered an AUD downturn against key cross-currency counterparts. While leading indicators point to a significant lift in wages ahead, Q2 wage growth printed short of expectations exacerbating the cost of living pressures and dampening the consumer outlook. We turn our focus now to employment data. We anticipate unemployment will remain near record lows while job growth will remain healthy. A robust labour market and the promise of higher wages to come should give the RBA impetus to accelerate the pace of interest rate hikes, potentially helping to add a floor underneath the AUD.

Key movers

UK inflation data set the mood for overnight trade, propelling global bond yields higher and driving investors toward haven assets. Inflation pressures were much stronger than anticipated in July forcing annual headline inflation above 10% while core inflation, which strips out highly price-sensitive items like food and energy was also significantly elevated, climbing above 6.1%. The surge in price pressures refocused investors’ attentions on the challenges facing central banks, driving a surge in global bond yields. UK 2 and 10-year rates lurched higher as markets scrambled to price in a more aggressive path of monetary policy tightening. Analysts are now pricing a 30% chance of a 75 basis point hike and a cumulative 200 point Bank of England rate adjustment in the 6 months to March 2023. Despite the correction in interest rate expectations the GBP struggled to gather positive momentum, falling on the day amid a broader risk-off move and a dire economic outlook. Markets anticipate inflation could rise as much as 15% while the Bank of England is forecasting a 15-month period of negative growth as the UK attempts to battle the rising cost of living pressures. With investors adopting a definitive risk-off tone the US dollar advanced on the day up 0.5% before edging lower into this morning’s open following the FOMC meeting minutes. The dovish undertone prompted investors to adjust expectations and bring forward Fed rate cuts next year. The dollar gave up 0.3% after the minutes were released. Our attentions turn now to US Philadelphia fed business survey and jobless claims data for direction through trade on Thursday.

Expected ranges

  • AUD/USD: 0.6880 – 0.7050 ▼
  • AUD/EUR: 0.6780 – 0.6880 ▼
  • GBP/AUD: 1.7220 – 1.7520 ▲
  • AUD/NZD: 1.1000 – 1.1100 ▼
  • AUD/CAD: 0.8920 – 0.9020 ▼

IMPORTANT: This information has been prepared for distribution over the internet and without taking into account the investment objectives, financial situation and particular needs of any particular person. Oz Forex Foreign Exchange makes no recommendations as to the merits of any financial product referred to in this website, emails or its related websites. Please read our Product Disclosure Statement and our Financial Services Guide.

Regulated in Australia by ASIC (AFS Licence number 226 484)
© 2010 Copyright Oz Forex Foreign Exchange Pty Ltd ABN 65 092-375-703
OzForex Foreign Exchange Services

Member of FOS (Financial Ombudsman Service)
Full Member of AFMA (Australian Financial Markets Association)

Feed news Join Telegram

Recommended Content


Recommended Content

Editors’ Picks

EUR/USD stays below 0.9800 after US inflation data

EUR/USD stays below 0.9800 after US inflation data

EUR/USD continues to trade in negative territory below 0.9800 in the American session on Friday. The data from the US showed that the annual PCE inflation declined to 6.2% in August but the stronger-than-expected core reading didn't allow the pair to gain traction.

EUR/USD News

GBP/USD rebounds from daily lows, reclaims 1.1100

GBP/USD rebounds from daily lows, reclaims 1.1100

GBP/USD fell to a fresh daily low below 1.1030 but managed to reverse its direction and climbed above 1.1100 during the American trading hours on Friday. The pair remains on track to snap a two-week losing streak despite having suffered heavy losses earlier in the week.

GBP/USD News

Gold extends daily rally beyond $1,670

Gold extends daily rally beyond $1,670

Gold preserved its bullish momentum and rose above $1,670 after the mixed inflation data from the US on Friday. The benchmark 10-year yield is down more than 2% as markets look to wrap up the third quarter, fueling XAU/USD's daily rally. 

Gold News

Shiba Eternity download day the biggest bullish catalyst in SHIB history?

Shiba Eternity download day the biggest bullish catalyst in SHIB history?

Shytoshi Kusama, the project lead for Shiba Inu, has dropped a teaser about Shiba Eternity games for the SHIB community. Proponents expect the launch of the collectible card game to be a bullish catalyst for Shiba Inu price. 

Read more

SPDR S&P 500 ETF Trust (SPY) Forecast: We are teetering on the brink

SPDR S&P 500 ETF Trust (SPY) Forecast: We are teetering on the brink

Equity markets remain at the precipice of a technical collapse, which we examine in the weekly long-term chart below. The overall picture remains one of nervousness ahead of the upcoming Q3 earnings season.

Read more

Majors

Cryptocurrencies

Signatures