Daily Currency Update The Australian dollar tested new lows through trade on Tuesday, unable to extend gains enjoyed through a brief improvement in the underlying risk narrative. Having slipped below US$0.6450, the AUD mounted a recovery through the domestic session clawing its way back above US$0.65 to mark intraday highs at US$0.6510. After two days of hyper volatility, markets appeared content in consolidating positions and investors looked again to risk assets, prompting a short-run improvement in demand for risk through the Asian session. The upturn was, however, short lived. More hawkish Fed commentary, coupled with a string of solid US data sets, fresh concerns surrounding UK economic vulnerability and a surge in gas prices conspired to push investors back toward haven assets, allowing the USD to recoup early losses and enjoy another overnight uptick. Faced with broad based USD strength the AUD drifted back below US$.6450, marking fresh lows at US$0.6415, a new 30 month low. With little of note on today’s macroeconomic ticket our attentions remain with broader market themes. The UK’s inherent vulnerabilities should continue to stifle any real risk on relief, while commentary from key European and US central bank figures and the promise of tighter financial conditions will continue to drive near term AUD downside. Key Movers There was ample price action across currency markets through trade on Tuesday as a short-run improvement in the underlying risk narrative helped offer some respite to the embattled GBP, euro and yen. After two days of hyper volatility markets enjoyed a brief upturn through the Asian session, allowing the euro to claw its way back above US$0.9650, while the GBP poked its head above 1.08, and the yen forced the USD back toward 144. The upturn was however short lived as the focus shifted back to the UK as the epi-centre of recent currency turmoil. Pricing across UK rates continued to surge as markets price in a significant BoE policy response, amid mounting fears a credit crunch will sap even more energy from an economy already struggling under the weight of an energy crisis, fiscal debt crisis and balance of payments crisis. Having touched intraday highs at 1.0850, the GBP slipped back below 1.07 marking session lows at 1.0650. Concern for the UK, coupled with a surge in European gas prices, a string of stronger US data sets and more aggressive fed commentary forced investors back toward haven assets, prompting an overnight USD surge. The DXY dollar index closed higher on the day and with little of note on today’s macro ticket, elevated risk aversion should ensure it maintains much of the recent upturn. Expected Ranges AUD/USD: 0.6380 – 0.6530 ▼ AUD/EUR: 0.6650 – 0.6750 ▼ GBP/AUD: 1.6480 – 1.6920 ▲ AUD/NZD: 1.1370 – 1.1470 ▼ AUD/CAD: 0.8780 – 0.8920 ▼

Summary The Consumer Confidence Index rose to its highest level since April, and now sits more than 12 points higher than where it was just two months ago. Falling gasoline prices and a still-tight labor market are the main reasons we have seen a recent rebound in confidence. But as inflation persists and the Fed lifts rates to combat it, we are unlikely to see confidence approach pre-pandemic levels. Read the full report here

EUR/USD kick-started a new round of declines as flash PMIs figures across Europe pointed at a further fall in business activities with both the EU services and manufacturing PMIs edging lower in the contraction area weaker than expected. As seen on the four-hour chart, a decisive break below the 0.98065 barrier paved the way for euro sellers to try the 0.97434 hurdle, around the 161.8% Fibonacci projection of the last upswing from 0.98065 to 0.99086. If selling pressure intensifies at 0.97434, the price may overcome this obstacle, heading towards the next support at 0.97044. Further push below this level can bring more sellers to join the market and turn their attention towards 0.96412. Otherwise, should buyers retake control, they may keep the pair sideways between 0.97434 and 0.98065. Further traction above the broken support of 0.98065 can put the last top at 0.99086 on the spotlight. Diverging EMAs exhibit accelerating bearish sentiment with the 50-EMA being below the 200-EMA. Short-term momentum oscillators reflect a bearish bias in the market. RSI is floating in the oversold area below the 30-level. That means the price may hang out at the 0.97434 hurdle before clearing that. Momentum is also moving down in the selling territory. Likewise, MACD bars get taller below zero, aiming to cross below the signal line as well.

The vision of ever-increasing interest rate hikes in the US, along with worse macroeconomic data readings in the form of PMI indexes, may have negatively affected stock indexes on Friday 23.09.22. An addition Added to this was the UK's tax cut plan, which in the current situation could send investors into a tailspin. As of 12:52 GMT+3, Germany's DAX is losing more than 2%. Britain's FTSE100 is down nearly 2% to 7036 points. (the lowest in 10 weeks) the broad Stoxx Europe 600 index of European companies has fallen 20 percent from its November 2021 peak to 391 points, indicating a potential downswing. The EU50 index hit its lowest level in 22 months at 3356 points, while Germany's DAX fell to 12354 points, its lowest in 22 months. Announcements of more hikes, UK plan and weak data There seems to be no good news in the markets today, only bad or even worse news, which may be reflected in the behaviour of stock indices. Stock market investors face the prospect of increasingly expensive capital on both sides of the Atlantic, as ECB President Christine Lagarde has said that Eurozone policymakers will continue to raise interest rates over the next few meetings, and markets are betting that the ECB deposit rate could reach 3% by June 2023. On top of that, there may be increasingly weak macroeconomic data, such as today's series of PMI index readings. They show that soaring energy prices continued to hamper economic activity in the eurozone, and September PMI data showed that the eurozone and German private sectors contracted for the third consecutive month. The S&P Global Flash Eurozone Composite PMI fell to 48.2 points in September 2022 from 48.9 in August. Excluding pandemic shocks, the reading was the lowest since May 2013. New orders fell the most since April 2013, excluding periods of pandemic restrictions, and the backlog of unfilled orders fell for the third consecutive month. The UK with a fiscal plan Financial markets may have been dealt another blow with the announcement of the implementation of the UK's £161 billion fiscal plan over 5 years, Bloomberg reported, which under the current circumstances could be a breakneck task with an unknown outcome. On the one hand, the Bank of England has announced the possibility of selling £80 billion worth of bonds within 12 months and further interest rate hikes and the government may also raise funds from bond sales for its plans. This could lead to a bump in the British financial market, where bonds, stocks and the British pound seemed to cheapen even simultaneously. Investors in the interest rate market now seem to be pricing in the possibility of a 1 percentage point increase in the Bank of England's main interest rate by November, in just over a month. To summarize the events in the UK in recent hours, per Bloomberg: the Truss economic plan is causing UK markets to collapse, the UK is planning the biggest tax cuts since 1972 to spur economic growth, and UK bonds are falling as the government will increase borrowing more than expected, the UK is likely already in recession as the pound's weakness increases inflation. What's next after such a sharp plunge in the markets? It seems that financial markets need stabilization in expectations of central banks' actions. Currently, there seems to be a chase for higher and higher possible interest rates in the future. Investors do not know where this race and festival of hikes will actually end. None of us probably wants a situation in which a loan one month is at a given interest rate, the next month at a different one, and in six months the interest rate may still be different. In such a situation, businesses cannot function properly, and neither can the financial markets.

The Dow Jones was sharply down on Friday, losing around 1.5% for the day until the mid-US session and extending sharp fall into fifth straight day. The index is also on track for a big weekly loss of over 4% and also for a second consecutive week in red. Strong risk aversion on growing fears of a recession as well as concerns about the strength of the impact of aggressive Fed’s policy tightening on corporate earnings, was the main driver of the price. Fresh weakness pressures key supports at 29654/29638 (Fibo 38.2% of 18044/36830, 2020/2022 rally / 2022 low of June 17), break of which would generate strong bearish signal for further acceleration lower and expose targets at 28875 / 27437 (55MMA / 50% retracement of 18044/36830). Bearish studies complement to weak sentiment and only substantial change in fundamentals could slow or reverse the current steep fall. Meanwhile, limited corrective upticks on oversold conditions and profit-taking would provide better levels to re-join strong downtrend. Res: 30000; 30107; 30238; 30395 Sup: 29000; 28875; 28000; 27437

Central banks were front and center this week, as major institutions such as the Federal Reserve, Bank of Japan (BoJ) and Bank of England (BoE) met to assess monetary policy in their respective economies. At a high level, policymakers generally communicated a hawkish outlook for monetary policy, although the Fed's updated “Dot Plot” garnered the most attention and resulted in renewed volatility across global financial markets. However, the BoJ's commitment to accommodative monetary policy and FX intervention from the Ministry of Finance were also notable, while U.K. financial markets tumbled in the aftermath of the BoE announcement and government fiscal stimulus. Heading into this week, we believed the U.S. dollar would continue to strengthen through the end of this year. After the events of this week, we have increased conviction in that view, and now believe dollar strength could continue into the early part of 2023. We will make a more formal assessment of currency markets and provide updated exchange rate forecasts in our September International Economic Outlook, although as of now, we are likely to extend our dollar strength view into Q1-2023. Read the full report