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Vaccine hopes prompt risk on surge pushing AUD through 0.70 US cents

AUD - Australian Dollar

The Australian Dollar advanced through trade on Wednesday, breaking resistance at 0.70 US cents following encouraging reports in the race for a COVID19 vaccine. Risk sentiment surged after Moderna reported its early stage clinical trial showed positive results with all participants producing antibodies, while Astrazeneca in partnership with Oxford University are expected to release strong results from its phase three clinical trial before the end of the week. Optimism surrounding a vaccine bolstered demand for commodity led currencies and the AUD stretched to intraday highs at 0.7034 before profit taking saw the rally falter and the AUD ease back toward the all important 0.70 resistance handle.

Having been range bound for much of the past fortnight optimism across currency markets has helped stretch recent topside handles leaving the door open for a possible extend break above 0.70 and run toward 0.71. Risk continues to dominate direction and yesterday’s upturn shows the market is putting more stock in positive news than the relentless barrage of negative COVID19 headlines. Investors clung to reports vaccine trials were progressing faster than expected, setting aside the threat caused by the alarming and unchecked spread of COVID19. While we continue to expect moves above 0.70 will be hard won, anything that brings forward the timeline to full economic recovery will help foster a renewed risk on rally and drive the currency higher.

Attentions today turn to domestic labour market data and unemployment rate as a key marker of domestic economic health.

Key Movers

The US Dollar fell to a one month low through trade on Wednesday as hopes for a COVID19 vaccine were buoyed by early stage Clinical trials. Risk appetite surged, dragging equities and commodity currencies higher at the expense of have assets. The Canadian Dollar and Norwegian Kroner outperformed major counterparts while the USD, JPY and CHF all faltered amid the broader risk on move.

The Euro advance continued, marking fresh four month highs above 1.1450. Optimism surrounding this weeks EU summit and the proposed recovery fund continue to support the single currency while broader USD weakness helped extend gains. There is a hope leaders will reach an agreement surrounding the 750 billion Euro rescue plan, driving gains and hopes the Euro area will continues its faster than anticipated economic recovery. With expectations Europe will recover at a faster pace than its US counterpart the Euro is primed to push back through March highs at 1.15.

Attentions today remains squarely affixed to changing covid19 news with Astrazeneca and Oxford University expected to release result of its stage 3 clinical vaccine trail before the end of the week with positive results opening the door to an extended risk on run.

Expected Ranges

AUD/USD: 0.6930 - 0.7080 ▲

AUD/EUR: 0.6080 - .6180 ▲

GBP/AUD: 1.7880 - 1.8020 ▼

AUD/NZD: 1.0580 - 1.0690 ▼

AUD/CAD: 0.9410 - 0.9530 ▼