Risk sentiment sours sending AUD/USD back below 0.75 US cents

AUD - Australian Dollar

The Australian dollar opens back below 0.75 US cents this morning, unable to hold onto gains enjoyed through the domestic session. The AUD extended its recent uptrend through Thursday morning, marking fresh intraday and four-month highs at 0.7540, amid signs the RBA may be wavering in its commitment to uber accommodative interest rates until 2024. The RBA refrained from buying 2024 bonds under its yield control program, allowing the price to rise through the day. Having touched 0.17%, well above the 0.1% target, it could be a sign the RBA is not 100% tied to its current forward guidance. The AUD however turned lower into the afternoon and overnight. There appears no real catalyst for the shift in risk demand, rather markets just turned their attentions back to the myriad of headwinds plaguing the global economic recovery. Inflation concerns continue to fester as breakeven inflation estimates rose, touching 9-year highs overnight, while expectations for Federal Reserve rate hikes firmed, as investors price in two rate adjustments in the 2nd half of 2022. Giving up 0.7%, the AUD fell to intraday lows at 0.7460 before tracking sideways into this morning’s open.

Our attentions today turn to RBA Governor Lowe as he hits the wires. We are keenly attuned to any push back on current market interest rate pricing and commentary around a possible shifting forward guidance.

Key Movers

Safe haven currencies rebounded through trade on Thursday with the JPY, CHF and USD topping gains across majors amid a shift in risk sentiment. Expectations for a fed rate hike firmed yesterday, as the yield curve flattened and markets priced in two rate hikes through H2 2022. After a brief respite and expectation the pace of hikes may be slower than initially estimated, the firming in the short end yield curve helped remind markets the period of uber accommodative monetary stimulus is drawing toward a close. Equities fell slightly as commodity currencies bore the brunt of the correction, with energy sensitive commodities underperforming. With little of note on today’s macroeconomic docket we look to Fed president Jerome Powell for further forward guidance, while fluctuations in sentiment will guide the broader narrative into the weekly close.

Expected Ranges

AUD/USD: 0.7380 - 0.7550 ▼

AUD/EUR: 0.6350 - 0.6490 ▼

GBP/AUD: 1.8320 - 1.8550 ▲

AUD/NZD: 1.0390 - 1.0490 ▼

AUD/CAD: 0.9180 - 0.9280 ▼