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Aussie continues its upward march to within touching distance of 0.7

AUD - Australian Dollar

The Australian Dollar continued its upward trajectory, touching an almost one month high of 0.6988 before moderating to this morning’s open of 0.6974. Initially, the story wasn’t as rosy for the Aussie as it felt the weight of the weekends negative news headlines and softened on open on Monday. Despite starting from a lower base, the Australian Dollar found its feet quickly during the session as Asia came online.

With little on the domestic calendar to drive direction, the Aussie turned off-shore for momentum and found it with Australia’s largest trading partner China. A front-page editorial in the Chinese state media sponsored Securities Times wrote that developing a “healthy” bull market after Covid-19 was extremely important to the economy. This added to the already high-flying Chinese equity markets with the CSI300 Index climbing 5.7% and taking its gains over the last week to 14%. Chinese bond markets also received a boost with 10-year bond rates breaking through 3%, its highest level since January. With Chinese risk assets continuing its bullish run, the Aussie, long considered a proxy for global risk appetites, enjoyed a significant bid up to be in touching distance of 0.7.

Moving into Tuesday, the Aussie now turns to the RBA rate announcement for direction. While widely expected to be a hold at 0.25%, punters will turn to the accompanying statement for hints as to the central banks current thought process.

Key Movers

The United States Dollar weakened across the board overnight as risk assets continued to climb despite the worsening Covid-19 news headlines. The US Dollar Index fell 0.42% yesterday to open this morning at 96.77. Nevertheless, the broad movement lower for the US Dollar was relatively tempered when in comparison to movements in risk asset markets. The S&P500 rose 1.3% following China’s lead but risk aligned currencies didn’t quite claw back as much from the Greenback. Adding further support to the Greenback, was a surprisingly positive US ISM Non-Manufacturing PMI which jumped to 57.1 in June from 45.4 the previous month.

Across the pond, the Euro was our best performer for the day, reaching a high of 1.1345 before receding late in the session to open at 1.1308. Following the rally in Asian equities, the Euro also found support from a better-than-expected result in European retail sales with the decline only coming in at -5.1% year on year. The Euro continued to take its direction from risk-aligned assets however and moderated later in the day as the US Dollar regained some ground.

Expected Ranges

AUD/CAD: 0.9391 - 0.9488 ▲

AUD/EUR: 0.6112 - 0.6201 ▲

GBP/AUD: 1.7817 - 1.7996 ▼

AUD/NZD: 1.0591 - 1.0695 ▼

AUD/USD: 0.6914 - 0.7022 ▲