Bad news is good news; AUD/USD surges on weaker than anticipated US data

Daily Currency Update

The Australian dollar advanced through trade on Wednesday, moving back above US$0.67 amid an extended resurgence in risk appetite. Markets responded to weaker than anticipated US PMI data and an uptick in weekly jobless claims, driving US rates lower and subsequently pushing the US dollar down against most major counterparts. Having tracked sideways for much of the domestic session, bouncing between US$0.6630 and US$0.6660 the AUD surged upward overnight, powering through US$0.67 to mark intraday highs at US$0.6740. Markets continue to adopt a bad news is good news mantra, extending risk on runs amid weaker than anticipated US data points. The sustained weakening of the US economic outlook allows markets to adjust monetary policy expectations and price in a potentially shallower recession in 2023. With little of note on today’s domestic ticket our attentions turn to the FOMC meeting minutes and further guidance on policy makers plans to temper the pace of rate hikes. We anticipate the AUD will continue to track between US$0.65 and $US0.68.

Key Movers

The US dollar suffered another round of selling pressure as markets maintain a bad news is good news mantra. Softer than anticipated US PMI data and a rise in weekly jobless claims outweighed stronger than anticipated consumer sentiment and durable goods orders driving US rates lower and the US dollar downward against a host of counterparts. The Great British pound was the strongest of the major, pushing through 1.20 while the Yen continues to gather momentum against a weaker rates backdrop and the euro looks to consolidate its break above parity. Significantly the Canadian dollar failed to capitalise on broad based US dollar weakness and instead gave up 0.2% amid a sharp decline in Oil prices. Oil prices plunged 4% overnight as the US reported larger than expected Gasoline stockpiles while the EU imposed a higher than anticipated price cap on Russian oil to ensure supplies continue to flow into the global market. In other new the Chinese yuan weakened following protests in Zhenghou. Workers at Apples iPhone plant rallied against local authorities protesting Covid restrictions and inconsistencies. Social unrest is rising in China amid the growing pressures of ongoing lockdowns and restrictions and while the government is promising economic support the effectiveness of strict lockdown protocols is beginning to waver. With little of note on the macroeconomic ticket today we look to the latest Fed meetings minutes. While Fed officials have offered plenty of content in the 2 weeks since the last policy announcement the minutes will provide further insight into policy makers proclivity to temper the pace of rate hikes.

Expected Ranges

• AUD/USD: 0.6600 – 0.6780 ▲
• AUD/EUR: 0.6430 – 0.6520 ▲
• GBP/AUD: 1.7720 – 1.8020 ▲
• AUD/NZD: 1.0750 – 1.0820 ▼
• AUD/CAD: 0.8880 – 0.9050 ▲