AUD gives up ground in face of China economic headwinds
Daily Currency Update
The AUD slid off last week's highs through trade on Monday amid a softening in demand for risk and ongoing concerns surrounding China’s economic headwinds.With US markets closed it proved a relatively quiet start to the week as investor focus shifted to China’s State Council Meeting. Hopes for an expansive stimulus package were dashed as Chinese officials refused to be drawn on fiscal spending plans, weighing on the yuan.
As one of the worst performers on the day, the yuan gave up half a per cent against the USD, slipping back through 7.16, dragging the AUD lower. Having toyed with a break above US$0.69 early, the AUD slipped toward intraday lows at US$0.6835, before finding support and tracking back toward US$0.6850, which held through much of the overnight session.
Our attention now turns to the RBA’s June meeting minutes, China rate news, US housing starts and Fed commentary. With markets at odds with Fed Forward guidance, commentary from members Bullard and Williams will help shape direction through the week ahead.
Key Movers
The USD was broadly stronger through trade on Monday, despite local markets closing in observance of a long weekend. With risk appetite softening, the USD worked to recoup some of last weeks post FOMC losses, punching back through 7.16 against the yuan, forcing the euro back toward 1.09, the pound back below 1.28 and holding firm against the yen at 142.Global rates traded higher, led by European and UK Yields. ECB member Schnabel suggested inflation risks remain on the upside and that the central bank needs to err on the side of doing too much. While other members offered more dovish assessments of conditions, markets latched onto Schnabel’s comments, lifting expectations for rate hikes through Q3.
UK rates continue their upward march, led by the short end of the curve with 2-year gilts up 14bps. Our attention now turns to US housing data, China rates update and commentary from key Fed officials.
Expected Ranges
- AUD/USD: 0.6780 - 0.6890 ▼
- AUD/EUR: 0.6220 - 0.6320 ▼
- GBP/AUD: 1.8580 - 1.8820 ▲
- AUD/NZD: 1.0980 - 1.1080 ▲
- AUD/CAD: 0.9020 - 0.9120 ▼