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Australian Dollar soars to four-week highs as the FOMC delivers its decision

AUD - Australian Dollar

The Australian Dollar has been contained within a tight range of 30-pips against the U.S Dollar this week moving between levels of 0.6800 and 0.6830, this all changed last night as we saw the AUD/USD pair break resistance levels rallying to a four-week high on the back of risk sentiment and the US Federal Reserve. The pair is certainly the outperformer of the day and currently sits at 0.6878.

Consumer Confidence slid this month according to the monthly Westpac-Melbourne Institute Consumer Sentiment Index released yesterday, it is based on a survey of consumers and their spending. The index slipped 1.9 per cent to 95.1 points still below the neutral level of 100 for the past six months. The Index has fallen 6.1 percent since the RBA cut the cash rate which indicates pessimists outnumber optimists, throughout the second half of this year and the cuts are yet to have an impact on household consumption. The reluctance of consumers to spend in the September quarter was a key factor limiting GDP growth and the weak finish to confidence. Unemployment expectations index was up 1.1 per cent in December and 14.1 per cent higher than during the same month last year, indicating more people anticipate unemployment levels will increase in the next 12 months.

Looking ahead, Australia is set to release its monthly Melbourne Institute Inflation Gauge which measures the price of goods and services purchased by consumers, it can be an insight to consumer inflation and is designed to mimic the quarterly government-released CPI data. Also on the calendar, the RBA will release its quarterly Bulletin which provides analysis of the current and future economic conditions from the banks viewpoint.

Key Movers

The U.S Federal Reserve has left the interest rate unchanged at 1.50%-1.75% which was widely expected. They explain the “current stance of policy is appropriate” and made subtle changes to its statement by taking out any mention of uncertainties about the outlook. It is likely that policy will be on hold until the end of 2020 according to the projection of the dot plot.

A critical week for the UK and the Pound Sterling, tonight results from constituencies will to start trickling in late in the European session. The Pound has chosen Boris Johnson, so expect a tumble should early results see the Tories lose key seats. Marginal seats are expected to decide the outcome of the election.

Over Europe, Eurozone’s ZEW Economic Sentiment was released yesterday which showed economic morale amongst German investors had improved. The index rose to near a two-year high of 10.7 from -2.1 a month earlier, exceeding even the highest forecast in a Reuters poll of economists, aided by an unexpected rise in October exports boosting hope for an upturn in Europe's biggest economy. EUR/USD currently changing hands at 1.1134. Looking ahead for the Euro, Lagarde delivers her first policy decision and press conference which markets will be closely following.

Expected Ranges

AUD/USD: 0.6830 - 0.6930 ▲

GBP/AUD: 1.8950 - 1.9450 ▼

AUD/NZD: 1.0380 - 1.0500 ▼

AUD/EUR: 0.6120 - 0.6210 ▼

AUD/CAD: 0.9010 - 0.9120 ▲