Home Daily Commentaries AUD slide continues as China worries elevated

AUD slide continues as China worries elevated

Matt Richardson
Written by
Matt Richardson

Matt Richardson

OFXpert

Matt provides expertise in currency risk management to his clients, drawing from his 14 years of experience in foreign exchange.

| Tuesday 23 July, 2024

Daily Currency Update

The Australian dollar underperformed through trade on Monday, sliding below US$0.6650 amid China worries and a stronger US dollar. Market reaction to Joe Biden’s withdrawal from the 2024 Presidential Election race was largely muted as pundits and markets appear confident in continuing to price a Trump victory come November.

Instead, markets looked to China’s 3rd Plenum, a major policy meeting supposed to set out an agenda for growth and prosperity through the next 5 years. Investors were left wanting as officials failed to offer any new policy platforms to correct the slide in the property market and rebuild the economy. With concerns China’s economy will fail to recapture historical growth levels, demand for commodities slipped and the AUD broke below US$0.6650, marking lows at US$0.6632 before finding support.

Having kissed US$0.68 earlier in the month, the AUD suffered a sharp sell-off through trade last week and finds itself on the back foot amid a sudden risk-off shift and correction across key industrial commodities.

With little of note on today’s domestic docket, our attentions turn to European and US service and manufacturing PMI data Wednesday and the Bank of Canada policy meeting Thursday as key markers for direction, ahead of US GDP Friday.

Key Movers

Market reaction to Joe Biden’s withdrawal from the 2024 Presidential Election race was largely muted through trade on Monday and most majors traded within a narrow trading handle. With leading Democrats calling for Biden’s withdrawal growing through the last 3 weeks, it seems markets were prepared for the inevitable and pricing for a Trump victory in November was little changed.

US treasury yields rose amid elevated risk aversion while the euro and GBP edged marginally lower on the day. The Japanese yen was the day’s big winner, buoyed by the risk-off mood and growing calls for the Bank of Japan to lift rates next week. Weakness in Japanese consumer spending will likely weigh on policymakers and a Bloomberg report showed officials are divided on whether a rate hike is appropriate.

With markets expecting a shift in policy, we expect plenty of volatility this week, particularly against key crosses like the AUD and NZD.

Expected Ranges

  • AUD/USD: 0.6600 - 0.6700 ▼
  • AUD/EUR: 0.6050 - 0.6150 ▼
  • GBP/AUD: 1.9250 - 1.9550 ▲
  • AUD/NZD: 1.1020 - 1.1120 ▼
  • AUD/CAD: 0.9100 - 0.9200 ▼

Written by

Matt Richardson

OFXpert

As a Senior Corporate Client Manager, Matt provides expertise in currency risk management to his clients, drawing from his 14 years of experience in foreign exchange. Matt has clients who he has been working with for over a decade, a testament to his knowledge and dedication in the field. Matt is also a regular contributor on Ausbiz, offering clear and precise updates on currency market trends, showcasing his ability to interpret complex financial data into actionable insights.

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