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Pervasive Risk-Off Puts AUD on the Ropes

FOREX
  • The risk-off feel that's bubbled through markets since the Monday open crystallized further Thursday, with a sharp drop in commodities prices the bleeding through equities, fixed income and foreign exchange this morning.
  • Iron ore took focus in the late Asia session, with prices falling as much as 12% from the week's high as markets eye reports on China's intentions to 'aggressively' reduce steel production (thereby trimming demand for iron ore, a key input). This has undermined materials and energy stocks from the open, pressing core European markets lower by over 2% and, in turn, hurting risk sentiment.
  • The slip in commodities prices has worked against materials-tied FX, putting AUD, NZD and CAD at the bottom of the G10 pile.
  • The USD is firmer following the Fed minutes late yesterday, helping the USD Index trade at fresh cycle highs. The minutes proved hawkish, but were infitting with recent public FOMC speeches, preparing markets for a taper to asset purchases before the end of 2021.
  • Focus turns to weekly US jobless claims data, and a particularly frenetic option expiry schedule, with sizeable strikes in EUR/USD, NZD/USD and USD/JPY worth watching.

Energy BulletsCommodities
Energy BulletsCommodities

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