23rd December 2021- AUD/USD thrives in a risk-on environment, solid near highs of day, 0.7220


Market Headlines

The recent bounce in risk appetite continuing overnight with global equities all advancing (S&P500 up over 0.6% ) on stronger US data and continued thoughts that the Omicron outbreak will prove less severe on economic activity than initially feared. Little change for US Treasuries although the USD losing ground across the board – EUR/USD to highs above 1.1330, Aud/usd to 0.7220 and NZD/USD to 0.6820 highs.


Overnight Currency Range

AUD/USD 0.7121 0.7220

EUR/USD 1.1264 1.1342

GBP/USD 1.3240 1.3362

USD/JPY 113.95 114.37

NZD/USD 0.6742 0.6820

USD/CAD 1.2837 1.2924

USD/CNH 6.3743 6.3820

AUD/JPY 81.28 82.47

AUD/NZD 1.0558 1.0593


AUD Thoughts

AUD is the strongest currency on the day in a risk-on environment with US Consumer Confidence coming in higher than forecasted for December as third-quarter economic growth was revised higher. The US stock market has rallied and high beta plays are aligned positively, benefitting from the renewed enthusiasm. The Nasdaq Composite jumped 0.9% to 15,486.29 intraday, with S&P 500 up 0.8% and the Dow Jones Industrial Average 0.4% higher. All sectors were in the green, with consumer discretionary and technology leading the charge.


AUD/USD is firm, 0.9% higher around the highs of the day near 0.7217 at the time of writing. The 10-year US Treasury yield .is down 0.34% points to 1.46% and the US dollar, as measured by the DXY is down 0.39% sliding from 96.602 to a low of 96.036. US rates are starting to normalize. However, analysts suggest that the market tightening expectations for the Fed still have room to adjust; 2-year yield differentials are moving back in the dollar’s favour.


If inflation returns to the 2% target, then that implies a negative real policy rate at the end of a Fed tightening cycle, with the economy near full employment., sure there are downside risks from more variants but the rates market seems to be pricing in perfection from the Fed. The market continue to believe that markets are underestimating the Fed’s propensity to tighten, and this should lead to a further rise in US short-term rates in 2022.


The data run thinning out this coming session and into the Christmas break with November Personal Income and Spending data the potential highlight. Analysts focused on the strong momentum in the October spending data which appears to have persisted into November as high frequency spending data have shown further strength.


The relentless rally for the AUD in offshore trade has us clearing some of the recent resting offers in the 0.7200 area. Looking for further offers in the 0.7280/90 area ( the 50 and 100 day sma resistance ) although some further short covering can be expected through these levels. Bids from the recent lows nearer 0.7120.


Event Risk Data Today

JP – Nov Natl CPI y/y

IT – Dec Economic Sentiment & Consumer Confidence Index

SP – 3Q GDP q/q

CA – Oct GDP m/m

US – 18-Dec Initial Jobless Claims

US – Nov New Home Sales

US – Nov Durable Goods Orders

US – Nov Personal Income & Spending


Recent Posts

See All

Disclaimer

This material is provided by Navigate Global Payments (Navigate) ACN 615 699 888, AFSL 502711.  The material contains general commentary only and does not constitute investment or any other advice.  Certain types of transactions, like futures, options and high yield securities can be risky, and not suitable for all investors.  This information has been prepared without considering your objectives, financial situation or needs.  Please seek your own independent legal or financial advice before proceeding with any investment decision.  The information is believed to be accurate at the time of compilation and is provided in good faith.  Navigate does not warrant the accuracy or completeness of any information contributed by a third party. The information is subject to change without notice and Navigate is under no obligation to update the information. The information contained in this material are opinions of the author at the time of writing and does not constitute an offer, recommendation to act, a solicitation of an offer, or an inducement to subscribe for, purchase or sell any financial instrument or to enter a legally binding contract.  This information, including any assumptions and conclusions is not intended to be a comprehensive statement of relevant practise or law that is often complex and can change.  Past performance is not a reliable indicator of future performance. Any forecasts given in this material are predictive in character.Navigate Global Payments Pty Ltd nor its related parties or officers accepts no liability whatsoever for any loss or damages suffered through any act or omission taken as a result of reading or interpreting any of the information contained or related to this site.