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FOREX: Solid Session for Equities Weighs on EURAUD

FOREX
  • The strong performance for major equity benchmarks on Thursday has further supported a reversal of the sharp risk off moves in currency markets earlier in the week. As such the risk sensitive AUD has outperformed, bolstered by early hawkish rhetoric from RBA Governor Bullock.
  • As such, AUDUSD stands 0.90% in the green and moderate pressure on the single currency sees EURAUD slide over 1%. As a reminder, this cross reached the highest level since H1 2020 on Monday and has swiftly reversed 3.6% since this peak. Price action was underpinned by a hawkish tilt to the RBA Governor’s comments earlier in the session, indicating the committee won’t “hesitate” to hike if needed.
  • In similar vein, MXNJPY has risen 1.23% on Thursday and continues to be the most sensitive currency pair to adjustments in risk sentiment, owing to the severe carry trade unwind in recent weeks. USDMXN is down 0.90% ahead of this evening’s Banxico decision, which remains a close call.
  • Elsewhere, lower-than-expected initial jobless claims in the US provided USDJPY with a firm boost. Markets have grabbed onto the faintest signs of strength (233k vs 240k exp) in the labour market to further undo the sharp moves in the aftermath of last week’s unemployment report.
  • USDJPY gapped higher on the release, rising from just above the 146.00 mark to print as high as 147.54. The first topside level is at 147.90 before initial resistance is found at 149.77, the Aug 2 high.
  • Risk-on also weighed further on the Swiss Franc with both EURCHF and USDCHF rising around 0.5%.
  • China CPI/PPI will be in focus overnight before Canada employment data caps off the event risk this week.
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