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AUD fails to significantly extend upturn as risk sentiment begins to moderate

AUD - Australian Dollar

The Australian dollar crept back above 0.70 US cents through trade on Monday, buoyed by an uptick in risk appetite. Investors chased risk assets higher following reports further COVID-19 vaccine trials showed promising results. AstraZenica, in partnership with Oxford University, released results of trials that covered over 1,000 patients all of whom generated antibodies to the virus as well as T-cells which seek out and kill already infected cells. With no serious side-effects reported researchers will move to the next stage of clinical trials, upsizing the number of participants in the hope of having a finished product ready for delivery to key healthcare workers and those most vulnerable to the disease by years end. Having pushed back through 0.70 the AUD touched intraday highs at 0.7020 before leveling out and trading sideways into this morning’s open.

Attentions remain with the race for a COVID-19 vaccine as risk demand continues to steer direction. With investors largely ignoring the slew of negative data points and dire headlines any sign a vaccine will be ready sooner than first expected will help drive the risk on tone and support a higher AUD. That said, while the dollar has edged higher through the last 2 weeks the AUD has struggled to extend gains beyond 0.7020 with investors reluctant to extend gains amid heightened uncertainty. Current rallies are not supported by the same level of conviction as the rally of April and May and as risk sentiment moderates the threat of a slower economic recovery amid renewed restrictions across Victoria and NSW could prompt a correction leading through Q3 ad Q4.

Key Movers

The USD edged lower through trade on Monday amid a backdrop of optimism driven by positive COVID-19 vaccine trials and a resurgent Euro. The Euro touched four-month highs, jumping above 1.1450 after EU leaders agreed on distributing 390 billion of the 750 billion proposed recovery fund as grants to the worst hit member states while the remaining 360 billion will be parceled into low interest rate loans. The proposed agreement is a huge step forward in a united Europe and bolstered markets hopes the EU will continue to be proactive in tackling the problems raised by the COVID-19 crisis. Having touched intraday highs at 1.1467 the single currency opens marginally lower at 1.1444.

With little of note on the macroeconomic docket this week, attentions remain with fiscal support plans and COVID-19 headlines. Discussions between democrats and republicans regarding a proposed 1 trillion dollar economic relief bill continue through the week with delays possibly adding to safe-haven bids on the dollar.

Expected Ranges

AUD/USD: 0.6930 - 0.7030 ▲

AUD/EUR: 0.6080 - 0.6170 ▲

GBP/AUD: 1.7880 - 1.8120 ▲

AUD/NZD: 1.0520 - 1.0620 ▼

AUD/CAD: 0.9450 - 0.9530 ▼