AUD - Australian Dollar
The Australian dollar fell overnight, unable to sustain the advance above 0.73 US cents, amid growing concerns surrounding the global growth outlook. The whispering of a re-emergence in the reflation narrative we saw at the beginning of the week quickly vanished as investors looked to safe haven assets, prompting broad based US dollar gains. Having touched intraday day highs at 0.7310 the AUD fell steadily through the European and American sessions, slumping to an intraday low at 0.7230. The widespread lift in commodity prices and improving terms of trade outlook weren’t enough to rescue the AUD, as fears the global economic recovery will take far longer than first anticipated foster a constant environment of uncertainty. New roadblocks to recovery continue to emerge, and markets are now struggling to grapple with rising energy concerns and the threat of Chinese financial market collapse.
Our attentions today remain with underlying risk theme’s, and we anticipate the AUD will struggle on moves approaching 0.73 US cents, while finding support on moves below 0.72 and approaching the August low.
There was plenty of price action across major currencies overnight as investors continue to grapple with expectations for global growth. A renewed bout of risk aversion reared its head through trade on Tuesday as new roadblocks emerge, crimping a positive outlook and forcing investors toward haven assets. The US dollar index advanced over half a percent while the EUR slipped below 1.17 and the CAD dipped below 0.79 despite oil prices extending their recent appreciation, trading as high as 80.75 USD a barrel. The GBP was the day's big loser, facing mounting selling pressure amid concerns the Bank of England may be on the cusp of a policy misstep. Suggestions the MPC will tighten monetary policy ahead of a correction in asset purchase spooked investors. The British recovery is incredibly fragile. Rising energy concerns, significant supply driven shocks and higher taxes are expected to weigh on growth prospect and the introduction of tighter monetary policy could foster an extended economic downturn. GBP fell 1.4% toward lows at 1.3530 and appears increasingly vulnerable to further risk off moves.
Ongoing uncertainty across financial markets should continue to add support to the USD as a haven play. Until a clear road to recovery is available, and the market is able to add some conviction behind positive plays, we anticipate currency markets will maintain set ranges through the near term.
0.7170 - 0.7310 ▼
AUD/EUR: 0.6150 - 0.6250 ▼
GBP/AUD: 1.8520 - 1.8920 ▼
AUD/NZD: 1.0320 - 1.0450 ▲
AUD/CAD: 0.9120 - 0.9230 ▼