AUD / USD stable as risk sentiment and commodity prices support recent gains

AUD – Australian Dollar

The Aussie dollar rose slightly during trading on Monday, momentarily rising to 0.75 before maintaining a narrow overnight grip. After opening at 0.7465, the AUD climbed steadily in the final hours of the national session, supported by the sustained outperformance of energy-focused commodities. Oil and gas both posted gains and risk sentiment continued to improve after stagflation fears eased on Friday. The AUD appears to have rocked the chains which saw it drift between 0.7130 and 0.7360 for much of July, August and September, entering a new trading range and rebounding between support at 0.7460 and resistance on movements approaching 0.7550. With gains driven by improvements in risk discourse, the recovery could falter at any point, but for now, we expect commodity-led currencies to remain relatively well offered. With few notes on today’s macroeconomic record, our attention turns to tomorrow’s quarterly CPI print. The RBA has long maintained Australia’s response to supply constraints and increasing transitional price pressures is different from the rest of the global economy. A strong impression could well undermine this assumption, adding increasing pressure to push forward with monetary policy tightening.

Key movers

Price action in major currencies was largely muted in Monday’s trading, with most maintaining a narrow range of +/- 0.3% against the US dollar. The euro was the worst performer of the day and was under pressure early on as the dollar appeared determined to generate gains and force the currency back below 1.16. After hitting lows at 1.1590, the single currency rose slightly before maintaining a narrow 10 point range until this morning’s open. Investors appear to be positioning themselves for the ECB’s policy update this week. WE expect the political markers to present a consistently conciliatory tone and focus on two key talking points. What will happen to the current PEPP bond purchase program? And will the ECB push back market expectations for a rate hike in 2023? Any extension of the current bond buying program will likely weigh on the euro as the Fed appears poised to announce the reduction of its quantitative easing program while increasing inflationary pressures and global rates could prompt the ECB to move forward a rate hike. Overall, we don’t expect much from this month’s policy update, but rather it is seen as a transitional event ahead of a possible policy update in December.

US consumer confidence and the manufacturing index headline the macroeconomic ticket as the risk discourse continues to guide.

Expected beaches

CAD / USD: 0.7420 – 0.7550

EUR / EUR: 0.6390 – 0.6480

GBP / AUD: 1.8220 – 1.8520

AUD / NZD: 1.0390 – 1.0520

CAD / CAD: 0.9190 – 0.9320

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About Natalee Broderick

Natalee Broderick

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