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Investors shrug off dovish RBA minutes as AUD edges higher

AUD - Australian Dollar

The Australian dollar drifted lower through trade on Wednesday, slipping back below 0.68 US Cents as US/China tensions continue to simmer and the promise of a trade deal fades. In the absence of domestic data, the AUD was at the mercy of offshore risk sentiment and the FOMC’s latest meeting account. Investors appetite for risk soured after the US senate passed a bill in support of Hong Kong protesters, prompting a strong response from China and dousing renewed hopes a preliminary trade deal might be struck throughout the last month of the year. Demand from commodity currencies and equities wavered and the AUD gave up intraday highs at 0.6830.

There were little surprises in the FOMC meeting minutes as a dearth of Fed speakers through the last two weeks have made clear the Fed’s position. The promise of interest rate stability in the absence of a significant economic slowdown helped prop up the world’s base currency and pushed the AUD to intraday lows at 0.6790. With little of note on today’s macroeconomic calendar we expect direction to be driven by the ongoing stream of trade commentary as tariff talks drive demand for risk. In the absence of any shock developments we expect the AUD will remain range bound bouncing between 0.6780 and 0.6830.

Key Movers

Sterling edged ever slightly lower in the wake of the UK electoral debate with Labour’s Jeremy Corbyn proffering a stronger showing than many expected. While the debate result has had little impact on broader election expectations sterling slipped below 1.2900, while marking a new one-week lows against the Euro. We continue to watch headline developments for any shift in polling momentum.

The US dollar advanced against most major counterparts as trade and political tensions threaten to force phase one of the US/China trade deal into 2020. China’s push for a tariff roll back and sustained pressure from the White House to meet its own demands have created a road block, forestalling recent negotiations and increasing the likelihood a new stage of tariffs will be implemented in December. Spurred by souring demand for risk and a push to haven assets the US dollar gathered upward momentum forcing the Euro back toward 1.1050 and jumping through 108.50 against the Japanese Yen.

Expected Ranges

AUD/USD: 0.6780 - 0.6830 ▼

AUD/EUR: 0.6110 - 0.6180 ▼

GBP/AUD: 1.8820 - 1.9180 ▲

AUD/NZD: 1.0580 - 1.0680 ▼

AUD/CAD: 0.9010 - 0.9080 ▼