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Aussie resilient despite global headwinds

AUD - Australian Dollar

The Australian Dollar traded modestly during the Tuesday session, oscillating between 0.6918 and 0.6935 to open this morning at 0.6924 despite some warning signs from the worlds largest economy. Risk sentiment soured overnight as escalating tensions between the U.S. and China continued to play havoc with the market. The S&P 500 fell back toward 2,800 and the 10-year bond yield fell 9 basis points below the 3-month bill, further inverting that part of the yield curve and flashing warnings of recession. Despite the poor domestic readings in the United States, the Greenback managed to appreciate slightly, aided by it’s status as a safe-haven currency. Within this context, the Aussie nevertheless managed to hold its’ own and was even helped along by weak US manufacturing data. Nevertheless, in the absence of a meaty economic calendar, the Aussie continues to track the CNH and trade on political headlines and risk sentiment.

Wednesday looks to be more of the same for the Aussie with the action picking up later in the week. Across the Tasman, the RBNZ is set to speak which may have some residual effects on the Aussie although the Australian Dollar will likely continue to trade on the headlines within a tight range in the absence of any substantial data.

Key Movers

The Euro continued its downward trajectory overnight, drifting lower as the Greenback continued to strengthen. Aided by the risk-off sentiment pervading global markets, the US Dollar managed to make inroads against the at-risk Euro. Opening this morning at 1.1165, the Euro continues to come under pressure as the election results sink in and the Trade war continues. The rise of Eurosceptics dented confidence in the Eurozone which has seen the Euro drift lower throughout the week. Adding to the Euro’s woes are concerns of an escalation in the US-China trade war with China reportedly contemplating restricting rare-earth exports to the US. Rare-Earth, a crucial component in a number of advanced technology products is primarily sourced from China, who hold around 71% of the worlds supply. Overall, the Euro shed 0.28% on Tuesday.

The Great British Pound also remains weak with political uncertainty dampening the Sterling’s prospects. Opening this morning at 1.2655, the Sterling faced a number of headwinds on Tuesday. As expected, British traders returned to work on Tuesday after the public holiday on Monday to find the disappointing news of the Brexit’s party’s victory in the European election. The Pound dipped lower on the headline although was slightly supported by reports that Jeremy Corbyn, the Labour party leader intends to back a second Brexit referendum. Adding to the risk-off sentiment was the news of an escalation between the US and China with the uncertainty of a resolution playing havoc with risk appetites globally.

Expected Ranges

AUD/CAD: 0.9302 - 0.9367 ▼

AUD/EUR: 0.6156 - 0.6244 ▼

AUD/GBP: 0.5425 - 0.5524 ▲

AUD/NZD: 1.0531 - 1.0612 ▲

AUD/USD: 0.6855 - 0.6972 ▼