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Australian dollar makes fresh multi-month highs after dovish FOMC

AUD - Australian Dollar

The Australian dollar was the greatest beneficiary of renewed risk appetite overnight, as US equity markets were buoyed by the FOMC’s dovish monetary policy statement. The AUD has round-tripped from 0.6980 to touch 11-month highs of 0.7063 before retreating into this mornings’ open with the pair currently oscillating around the 0.7000 handle. Despite the NZD also benefiting from the risk rally, AUD/NZD was able to rise from 1.0680 to 1.0730 overnight.

With the AUD/USD’s tight correlation with global equity markets still intact, the Aussie’s rally was largely unsurprising as the FED’s dovish monetary policy statement stimulated US equities. The US central bank left the policy rate unchanged at 0%-0.25%, delivered lower inflation and growth forecasts and made no mention of slowing down its policy stimulus even as equity markets rally.

Thursday is set to be a pretty quiet day. On the data front, we have MI inflation expectations for June on the domestic docket before retail card spending across the pond. Neither of which are expected to be market movers. Attentions will then turn the May PPI and jobless claims out of the world’s largest economy. Given the AUD/USD’s current consolidation around the 70c mark, a continuation of the Aussie’s recent uptrend could see it test 0.7080 on the topside whilst downside moves are expected to meet initial resistance at 0.6989.

Key Movers

As we touched on above, the major story overnight was the dovish monetary policy statement from the FOMC. The worlds largest economy opted to maintain its current monetary policy stance, continue its COVID 19 stimulus packages and lowered its CPI and growth forecasts. The moves translated into a weaker USD in currency markets, allowing the EUR, GBP and JPY to all rise against the greenback.

The EUR was able to break through the 1.14 mark overnight as it rose from 1.345 to 1.1422, representing a three-month high. The sterling also broke through 1.28 with USD/JPY falling to trade below 107.

Global markets will be looking towards the US may PPI and initial jobs claims numbers which are due out tonight before attentions turn to Friday’s session. Friday delivers Industrial production data out of New Zealand, Japan, the UK and the Eurozone. WE will also see UK GDP and trade balance data for April before US consumer confidence and JOLTS jobs data for April to round out the week.

Expected Ranges

AUD/USD: 0.6890 - 0.7080 ▲

AUD/EUR: 0.6115 - 0.6225 ▲

GBP/AUD: 1.8130 - 1.8335 ▼

AUD/NZD: 1.0640 - 1.0790 ▲

AUD/CAD: 0.9300 - 0.9440 ▲