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Aussie dollar bounces off lows amid improved sentiment and promise of targeted US fiscal support

AUD - Australian Dollar

The Australian dollar edged upward, creeping back toward 0.7150 amid improved market sentiment and a renewed appetite for risk. Having crashed through 0.71 US cents, the AUD found support on hopes at least some US fiscal stimulus may be made available before the November 3 election. Despite yesterday’s abrupt end to relief talks President trump and the republicans have indicated another round of stimulus cheques will be delivered to struggling US households while targeted assistance to the embattled airline industry and small businesses helped renew optimism across financial markets. The AUD crept back toward 0.7150 marking intraday highs at 0.7152 before entering a narrow trading band, bouncing between 0.7135 and 0.7150.

Attentions remain squarely affixed to the risk narrative ahead of tomorrow RBA financial stability review. Investors will be keenly attuned to the RBA twice yearly report for any insight that might build on Tuesday’s dovish policy statement and provide some guidance as to the path of interest rates and QE. With many investors now expecting a rate cut as early as next month, a hawkish surprise may help push the AUD back toward the top end of recent ranges while a dovish review could see a break back toward 0.71 US cents.

Key Movers

The USD, JPY and CHF all led losses across major currencies through trade on Wednesday as the mood across financial markets improved amid hopes at least some US fiscal stimulus would be made available before the election. Another round of $1,200 cheques are set to be delivered to embattled American households in a bid to revive the consumer led economy, while the President intimated targeted relief to small businesses and the decimated airline industry had Republican support. The dollar index fell 0.2% nearing Tuesday’s two week low with support for the worlds base unit continuing to eb and flow in response to fluctuations in risk demand.

The Great British Pound remains vulnerable to further volatility in the lead up to the all-important October 15 EU summit. The summit has been earmarked as the self-imposed deadline for striking a trade deal and avoiding a hard Brexit and with negotiations still bogged down by a failure to compromise on Fishing rights and State Aid an 11th hour deal is becoming increasingly more likely. While the market is still holding out hope a deal can be struck Britain has made it clear it is prepared to walk away from the table while the EU is not prepared to make compromises ahead of the summit. Failure to reach an agreement will likely see all confidence in the GBP evaporate, prompt a run on Sterling and a sharp correction.

Expected Ranges

AUD/USD: 0.7080 - 0.7230 ▲

AUD/EUR: 0.6020 - 0.6110 ▲

GBP/AUD: 1.7880 - 1.8120 ▼

AUD/NZD: 1.0760 - 1.0890 ▲

AUD/CAD: 0.9420 - 0.9520 ▲