AUD finds some support despite elevated risk aversion
Daily Currency Update
Currency price action remains extremely volatile as the fall out from the UK’s mini budget continues to reverberate across global financial markets. The AUD was unable to sustain gains enjoyed in the wake of the Bank of England’s announcement it would intervene to protect the debt market, sliding back below US$0.65 through trade on Thursday. Risk assets, equities and commodity currencies all turned lower overnight, as global rates again tracked higher and the promise of substantial rate hikes ahead continues to weigh on growth expectations. Having tracked toward intraday lows at US$0.6440, the AUD has found some support, maintaining a narrow trading range, bouncing between 0.6450 and 0.6500 US cents.With little of note on the domestic macroeconomic ticket our attentions remain squarely affixed to developments in the UK, while Chinese PMI data, European CPI and more Fed commentary provide some colour leading into the weekly close. While it appears the wild price action that dominated markets through the start of the week has subsided, we still anticipate volatility will remain elevated as investors reposition global rate and growth expectations. The AUD should continue to find support on moves below $0.64, while meeting resistance on forays above $0.65 and approaching $0.6530.
Note: There will be no commentary on Monday 3rd October in lieu of the Labour Day Public holiday. Our content and commentary will resume on Tuesday 4th.
Key Movers
The Great British pound was again the standout mover as the UK remains the epi-centre and catalyst for broader price action across currency markets. Having tracked sideways through the domestic session, the GBP surged higher overnight after the government's Office of Budget Responsibility announced it would review Chancellor Kwarteng’s free spending mini-budget and provide new fiscal forecasts. Previously, the new Truss government had chosen not to obtain an OBR review, a move that invoked concern and criticism for fears the aggressive spending plan had not been properly costed and would only add further pain to a balance of payments already in crisis. The news, coupled with Wednesday’s BOE intervention has helped ease contagion concerns and alleviate pressure on the UK embattled pension sector. Having tracked back above 1.10, the GBP surged to intraday highs above 1.1150 to trade at 1.1179 at time of writing.In other news, the euro continued to recoup ground lost earlier in the week climbing above 0.98 amid elevated inflation pressure in Germany and more hawkish commentary from key ECB officials. German inflation surged above 10% and while Spanish CPI contracted, it remains shockingly elevated at 9.3% year on year. ECB officials appear set now to raise rates by 75 basis points in October.
The yen maintained a narrower trading handle than most counterparts, hovering around the 144-145 mark as the backdrop of global rates prevent any wholesale USD/JPY downturn, yet sustained gains have been capped as investors remain wary of further Ministry of Finance intervention of forays above 145-146.
Our attentions remain squarely affixed to developments in the UK, while Chinese PMI data, European CPI and more Fed commentary provide some colour leading into the weekly close.
Expected Ranges
- AUD/USD: 0.6380 - 0.6550 ▼
- AUD/EUR: 0.6580 - 0.6730 ▼
- GBP/AUD: 1.6620 - 1.7480 ▲
- AUD/NZD: 1.1280 - 1.1420 ▼
- AUD/CAD: 0.8850 - 0.8950 ▲