The Australian dollar was one of the biggest casualties overnight as the USD rose, despite solid moves on commodity markets, as the interest rate dynamic continues to outweigh the other factors. This keeps the Pacific Peso on a downward trajectory for 2022 so far, breaking the very nascent uptrend from the Xmas breakout period as it looks set to return to the 70 cent handle against USD as we head into tonight’s all important US unemployment print:
On the crosses, the situation is also dire for the Aussie, particularly against Pound Sterling.
From PoundSteringlive:
The Pound to Australian Dollar exchange rate climbed above 1.88 and appeared on course for five month highs just above the 1.90 handle in the penultimate session of the week as a strengthening U.S. Dollar drove a reversal of the December rally in AUD/USD.
Thursday’s Dollar-induced declines in Australian exchange rates were the dominant driver of GBP/AUD’s advance back above 1.88 and would see the Sterling rate foraying above 1.90 over the coming days if December’s rally in AUD/USD continues to unravel.
GBP/AUD tends to closely reflect the relative performances of AUD/USD and its Sterling equivalent GBP/USD, which also fell on Thursday but to a lesser extent than its Aussie counterpart.
AUD/USD had reversed almost half of last month’s rally in Europe’s Thursday session and appeared on course for a return to around 0.7100, which would lift the Pound to Australian Dollar rate as far as 1.9052 in the absence of intervening declines in GBP/USD.
And this is quite clear in the daily GBP/AUD chart with Pound Sterling about to push above the late 2021 high at the 1.90 level, although it fails to do so it sets up a bearish double top pattern:
However it is unlikely that the Australian economy will be as robust as those in Europe and US, where the RBA continues to sit on its hands and go surfing until February comes around.