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The AUD in July 2022

AUD/USD opened the month at 0.6903, fell to a monthly low of 0.6682 on July 14 and hit a high of 0.7032 on July 29 before closing the month at 0.6985 .

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The AUD in July 2022

AUD/USD opened the month at 0.6903, fell to a monthly low of 0.6682 on July 14 and hit a high of 0.7032 on July 29 before closing the month at 0.6985 . AUD volatility in July continued to be driven primarily by swings in global risk sentiment; mainly negative in the first half of July before a reversal of the situation from the middle of the month.

Low risk appetite at the start of July reflected growing concerns about a significant global growth slowdown/possible recession, heightened by weaker-than-expected incoming US economic data (e.g. ISM manufacturing), as well as heightened fears that Russia is militarizing the gas supply. , which could condemn the euro zone to recession.

The AUD enjoyed a temporary boost on July 4-5 amid reports that President Biden was planning to cut Chinese import tariffs and then the RBA to raise the spot rate by 50 basis points. This AUD strength proved short-lived as fears of slowing global growth intensified, which was reflected in Brent oil prices falling more than 9%, while the The USD relied on what was seen as a ‘hawkish’ FOMC meeting minutes from June, which included a reference to an upward price revision. inflation forecasts.

Another slippage in AUD/USD followed June’s US CPI report (headline +9.1% vs. +8.8% expected), prompting fears that the Fed could hike 100bps on of its next meeting (Bostic of the Fed noting, after the CPI, that “Eeverything is at stake ”). Eurozone inflation then reached a new record (+8.6%), supporting a possible 50 basis point hike by the ECB. Inflation in the UK also surprised on the upside (but not in Canada) ahead of Australia’s Q2 CPI report later in the month, which was broadly in line with forecasts (1.8% headline, core 1.5%), helping to erase market expectations for a 75 basis point rise in the RBA in August. .

The second half of July was characterized by improving risk sentiment with US stock markets rising, and where for the most part US earnings reports inbound did not validate fears of earnings losses/ sharply lowered forecasts. The resumption of gas supplies from the EU has also helped, although at a much reduced rate. On July 27, the Fed carried out what markets saw as a “dovish” 75 basis point rate hike, leading to lower bond yields/equity gains which hurt the USD and lifted the AUD. These currency movements were amplified a day later after the United States recorded a second consecutive quarter of negative GDP growth (-0.9%).

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