AUDUSD drops the most in two weeks amid Fed-inspired US Dollar strength, China woes

Risk appetite remained sour on early Thursday as market players reacted to the Fed’s hawkish halt, as well as economic woes surrounding China, Europe and the UK. Also, concerns about the looming US government shutdown and debt ceiling negotiations are challenging the sentiment, especially ahead of the monetary policy decisions on the Swiss National Bank (SNB), the Bank of England (BoE) and the Bank of Japan (BoJ), not to forget the preliminary reading of September’s PMIs.

With this, the US Treasury bond yields and the US Dollar remain firmer at the multi-day high while commodities and Antipodeans remain depressed.

As a result, the AUDUSD’s risk-barometer status joins the firmer USD to make the pair the biggest G10 loser while USDJPY lacks clear directions. It should be noted that the USDCHF rallied heavily after the SNB failed to convince policy hawks by holding the key rates unchanged.

That said, gold and crude oil remain pressured for the third consecutive day whereas the Asia-Pacific shares track the Wall Street benchmarks lower.

Furthermore, BTCUSD and ETHUSD also fail to ignore the firmer US Dollar, as well as fears of witnessing more hardships in the industry.

Following are the latest moves of the key assets:

• Brent oil drops nearly 1.00% intraday during the three-day losing streak to around $92.40 by the press time.
• Gold price also extends losses to near $1,925, down 0.20% intraday at the latest.
• USD Index stays defensive around 105.55 after rising to 6.5-month high earlier in the day.
• Wall Street closed with losses and the Asia-Pacific stocks edged lower. That said, equities in Europe and the UK edged lower at the latest.
• BTCUSD and ETHUSD print mild losses to around $27,100 and $1,620 as we write.

Risk aversion prevails

The fears of higher for longer rates at the Fed, ECB and other major central banks join growing agitations among Chinese nationals for the country’s efforts to propel growth via domestic consumption-driven measures to weigh on the sentiment of late.

Adding to this are the disagreements among the US policymakers about the debt ceiling extension, a failure to do so by early October would trigger the government shutdown and paralyze the world’s biggest economy.

Elsewhere, the downbeat Aussie data, dovish RBA and the pair’s risk-barometer status join China woes to weigh on the AUDUSD. Further, GBPUSD lick its wounds ahead of the BoE Interest Rate Decision but the USDCHF rallies after SNB’s dovish halt while EURUSD fails to justify hawkish comments from the policymakers at the ECB. Additionally, USDJPY traces firmer yields but fears of government meddling to defend the Yen at a multi-month high tame the pair’s upside momentum, not to forget Friday’s BoJ.

Crypto markets remain jittery as industry players keep fighting with the US SEC and have gained little success so far, suggesting more hardships in the future. That said, the whales are also liquidating positions and the options market signals are also bearish of late, which in turn keeps the BTCUSD and ETHUSD bears hopeful.

• Strong buy: USDCAD
• Strong sell: ETHUSD, GBPUSD, Gold
• Buy: USD Index, Nasdaq, USDJPY
• Sell: DAX, FTSE 100, BTCUSD, AUDUSD, EURUSD

BoE and some more data to watch

Having witnessed the monetary policy decisions of the Fed and the SNB, market players keep their eyes on the BoE for today, as well as the second-tier US data about employment and housing. Given the latest economic fears about the UK, a surprise pause in the rate hike by the BoE will make the GBPUSD vulnerable to a refreshing multi-month low while firmer US data can help the US Dollar stay firmer and exert downside pressure on the riskier assets.

May the trading luck be with you!