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AUD downturn stalls amid improved demand for risk

AUD - Australian Dollar

The Australian dollar crept upward through trade on Monday, supported by improved risk sentiment led by a rally across equity markets. With little domestic data on hand to drive direction the AUD maintained a narrow trading band throughout the local session bouncing off support at 0.7030 yet struggling to extend beyond 0.7050. While moves remained largely muted overnight commodity and growth led currencies found some support amid improved appetite for risk after equities and US stock jumped 1%, halting a four-week decline.

Attentions this week remain with the overall risk narrative as investors continue to adjust growth expectations and position ahead of a host of uncertainties leading into year end. Focus today shifts to the first US Presidential debate, a key marker in assessing both candidates and determining momentum as we move toward the November election. With the AUD supported on moves approaching 0.70 we will be watching the debate and a host of key US data sets as key markers driving demand for risk leading into next weeks RBA policy meeting. With ample room for the US dollar to continue its rebound a souring in risk demand could see the AUD track lower and find itself again trading between 0.68 and 0.70 US cents.

Key Movers

Safe Haven currencies underperformed through trade on Monday as improved demand for risk helped equities buck the four week downturn, finding upward momentum amid hopes talks between democrats and the White House may still lead to renewed programs of fiscal support ahead of the election. The USD and JPY both fell with the dollar giving up near two month highs, down three tenths of a percent on the day.

The Euro edged upward yet still struggles to regain the upward momentum that saw it test 1.20, trading between 1.1620 and 1.1680.

Sterling found support Monday, outperforming major counterparts amid hopes resumed Brexit negotiations will lead to at least some form of exit plan that avoids the UK falling off the proverbial economic cliff. Talks resumed Monday and while officials warned a deal was some way off optimism across markets as comments from EU official suggested the mood was improved and compromises on key sticking points, particularly fisheries, could be agreed in time to secure a plan ahead of the October 15 deadline. Breaking through 1.29 to touch 1.2925 attentions remain squarely affixed to headlines as they emerge. Any sign a deal will be brokered will be Sterling positive and likely drive a run back toward and through the psychological 1.30 barrier.

Expected Ranges

AUD/USD: 0.6930 - 0.7130 ▲

AUD/EUR: 0.6010 - 0.6090 ▼

GBP/AUD: 1.7980 - 1.8420 ▲

AUD/NZD: 1.0730 - 1.0850 ▲

AUD/CAD: 0.9420 - 0.9490 ▲