Daily Currency Update

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AUD outperforms major counterparts as retail sales surge

AUD - Australian Dollar

The Australian dollar edged upward through trade on Wednesday, buoyed by an improvement in risk appetite led by a rebound in oil prices and a sharp uptick in domestic retail sales. The AUD outstripped major currency counterparts as early retail sales estimates showed consumer spending in March jumped over 8%, the largest single month to month increase on record. Having opened below 0.6275 the AUD surged through 0.63 to touch highs at .6328. Additional risk driven demand then helped drive the currency higher still as Brent crude rallied 7% on the day, while the promise of continued fiscal stimulus helped ease market jitters. Touching 0.6351 the AUD drifted lower into the daily close as resistance on moves extending beyond 0.6350 firms and the momentum behind the recent bullish recovery slows.

Despite the strong retail sales print the AUD remains vulnerable to shifting macroeconomic data sets and the promise of a deep and prolonged recession. March’s uptick should prove somewhat of a false dawn as the rally in spending was primarily driven by a surge in stockpiling of household essentials like pasta, rice and toilet paper. The major supermarkets saw a 22% surge in spending through March while sales across said staples doubled. We would anticipate that spending will moderate in the months ahead, contracting sharply as the realities of the recession and increasing unemployment and underemployment force Australians to tighten their hip pockets.

Attentions today turn to US unemployment claims with little of note on the domestic docket. We continue to expect resistance at 0.6390/0.64 with preliminary supports at 0.6250 and 0.6180 intact for now.

Key Movers

The US dollar index edged marginally higher through trade on Wednesday, touching two weeks highs at 100.50 before shifting lower to hold at 100.39. Despite an improvement in broader risk sentiment and rebound in oil prices safe havens remained well bid through Wednesday as broader volatility across currency markets eased and investors looked to take stock. While commodity currencies rallied the Index found support in a falling Euro as the combined unit tested 1.08 ahead of a host of key service and manufacturing data sets due today. The Euro gave up gains won on the back of report EU leaders may be closer to agreeing a package of emergency funding and are set to meet again today. Disunity among member countries as to the best way to support the common market through the economic fallout spurred by the coronavirus is weighing on the combined unit as attentions turn to a slew of data sets that continue to trend southward. Attentions today a host of German, French and EU service and manufacturing PMI reports with an extended downturn only affirming the need for extensive fiscal and monetary policy support well into the future.

Expected Ranges

AUD/USD: 0.6180 - 0.6390 ▲

AUD/EUR: 0.5730 - 0.5890 ▲

GBP/AUD: 1.9280 - 1.9740 ▼

AUD/NZD: 1.0530 - 1.0680 ▲

AUD/CAD: 0.8850 - 0.9020 ▲