Daily Currency Update

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AUD buoyed by US fiscal stimulus hopes and improving health of President Trump

AUD - Australian Dollar

The Australian dollar crept higher through trade on Monday, buoyed by improving market sentiment and a broader USD correction. With little of note on the Domestic docket as most of the country enjoy labour day long weekend the AUD continued its correlation with risk demand, dragged higher by a bounce in equities amid hopes a US coronavirus rescue package will be released before the election and President Trump’s condition improves. Markets latched onto comments from Senior Democrats and Republicans from Friday, suggesting partisan differences had been set aside, allowing both parties to build a suitable and meaningful rescue plan. The AUD pushed toward 0.72, touching intraday highs at 0.7191 before edging marginally lower into this morning’s open. The Australian Dollar has bounced of September lows and appears well bid above 0.70 US cents as attentions turn to today’s RBA policy meeting. While the majority of the market expects board members will maintain the current policy setting calls for a a5 basis point rate cut have been increasing in recent weeks and markets will be keenly attuned to any dovish signal. A surprise cut or the suggestion rates will ease in November will weigh on the AUD ahead of tonight’s budget.

Key Movers

The USD and JPY were the big losers through trade on Monday as improving sentiment, amplified demand for risk and prompted a shift away from haven assets. President Trump’s improving health eased concerns the Presidential election may need to be delayed while helping firm challenger Joe Biden’s position in the polls. Markets are beginning to price in a Biden/Harris win and as the margin in the polls grows, concerns of a protracted post-election legal battle fade. The Dollar fell three tenths of a percent as markets chased equities higher.

The Euro outperformed on Monday, rallying half a percent to touch a two-week high at 1.1775. An adjustment in September PMI numbers and broader US dollar weakness helped fuel demand for the single currency as attentions turn to Commentary from ECB President Christine Lagarde on Wednesday for any insight suggesting the Bank will adjust its current policy setting in response to a new wave of COVID 19 infections and lockdowns. The Euro enjoyed strong gains through the 2nd quarter as aggressive stimulus measures and improving COVID 19 conditions bolstered expectations Europe could rebound quickly. Case numbers are however rapidly on the rise and while governments have been slow to implement aggressive stay at home measures consumer activities are none-the-less changing weighing on the recovery and likely dampening Euro upside through the short to medium term.

The Great British Pound edged higher, up 0.3% and pushing back toward 1.30, having touched intraday highs at 1.2985. Markets largely ignored commentary from Bank of England policy marker Haskell, suggesting the Bank stood ready to adjust the current policy setting and possibly introduce negative interest rates should further stimulus be required. Markets instead are focused on fading hopes an 11th hour Brexit deal will be reached. With the deadline fast approaching, markets have pinned their hopes on a new round of talks aimed at bridging the gaps currently preventing a deal. Failure to compromise will weigh heavily on the Pound.

Expected Ranges

AUD/USD: 0.7180 - 0.7230 ▲

AUD/EUR: 0.6020 - 0.6130 ▼

GBP/AUD: 1.7820 - 1.8190 ▲

AUD/NZD: 1.0750 - 1.0880 ▲

AUD/CAD: 0.9480 - 0.9550 ▼