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Australian dollar holding gains above 65 US cents

AUD - Australian Dollar

The Australian Dollar rallied on Friday by 0.55% as commodity currencies were driven higher by a recovery in risk sentiment to close the week. Opening just below 65 US cents following a strong surge on Thursday from lows of 0.6378, the local currency reached intraday highs of 0.6547.

While equity markets climbed higher, particularly the Nasdaq erasing all losses for the year, the release of the recent monetary policy report by the RBA on Friday morning painted a bleak picture of the overall economy. While there was no movement for the Aussie following the release, The RBA painted a pessimistic outlook for the domestic economy in the short term. Expecting a 10% contraction in GDP levels for Q2 and a full year decline of 6%. RBA does not expect inflation levels to claw back into their target range of 2-3% till the 2nd half of 2021 and thus interest rates to remain at record lows till at least 2022.

Australia’s first real unemployment numbers through lockdown restrictions on Thursday are sure to create interest as forecasts suggest a loss of 550,000 jobs are expected to be reported and an unemployment rate of 8.3% for the month of April.

The Australian dollar opens this morning at 0.6525. We expect support levels to hold on moves approaching 0.6460, while any upward push will likely meet resistance at 0.6570.

Key Movers

Unemployment figures in the United States on Friday surged to 14.7%, the worst print since the great depression. 20.5 million jobs have now been lost as the world’s largest economy braces for a severe recession due to COVID-19. Canada also recorded large job losses of 2 million people in April and the unemployment rate climbing from 7.8% to 13%.

The US Dollar topped out at 100.40 on Friday evening, losing steam following dismal unemployment figures, dropping to 99.10 on close. Equities were a shining light with major markets moving 1-2% higher as global markets price in the easing of lockdowns sooner than expected in developed countries.

Trade discussions between US and China looked to be under threat once again as President Donald Trump put the relationship on ice by blaming China for the outbreak of COVID-19 to Wuhan in 2019. As the country heads into economic uncertainty, phase 1 of the US-China trade deal should be heading in the right direction despite Trump stating he was “very torn” above whether to pull the deal and strain already tense relations.

The EUR/USD fell to lows of 1.0778 last week as tension rises over its asset purchase program. The European Union could open a legal case against Germany following the German Constitutional Court ruling it had three months to justify purchases under its bond buying program. Bundesbank, the biggest of the Eurozone’s central banks has threatened to leave the scheme, and it is expected the ECB will provide a response before the June monetary policy meeting.

The week ahead looks to focus on both Chinese and United States inflation data due for release on Tuesday. This is followed by by the RBNZ rate statement on Wednesday and Australian unemployment figures to round off a busy week on the docket.

Expected Ranges

AUD/USD: 0.6460 - 0.6570 ▲

GBP/AUD: 1.8800 - 1.9300 ▼

AUD/NZD: 1.0580 - 1.0680 ▼

AUD/EUR: 0.5960 - 0.6040 ▲

AUD/CAD: 0.9010 - 0.9120 ▲