AUD - Australian Dollar
The Australian dollar crept higher through trade on Thursday, bouncing off lows approaching 0.71 US cents. Sentiment continues to drive direction and the AUD has whipsawed between support and resistance as demand for risk fluctuates. Having drifted below 0.71 earlier in the week following President Trump’s withdrawal from coronavirus relief talks, the AUD has rebounded and tested a break above 0.7170 as hopes of at least a targeted stimulus plan grow and markets begin pricing in a Biden Presidency. Market confidence the Democrats will regain the Whitehouse and control both the Senate and House of Representatives is growing, as polls suggest a Biden/Harris victory will be healthy enough to avoid any Republican dispute. Markets concern a close race would lead to a protracted legal battle has eased in recent days bolstering demand for risk, as a Democrat victory will likely result in a swathe of new and aggressive stimulus measures.
Attentions today remain squarely affixed to the risk narrative, while the RBA’s bi-annual financial stability review may provide direction on future monetary policy. While we expect the message to be similar to that offered in the wake of Tuesday’s policy meeting, any further hint of a cut to interest rates could add pressure on recent supports. We expect the AUD will continue to bounce between support at 0.7020 and resistance at 0.7230.
The US dollar was largely unchanged through trade on Thursday when measured against a basket of major counterparts. A victim of fluctuations in risk demand the world's base currency countered minor losses against commodity currencies, with minor gains against haven counterparts and the euro. The single currency fell through 1.1750 following the release of the ECB’s September policy meeting minutes. The meeting account showed policy makers were concerned about the recent appreciation in currency value, perhaps opening the door to a further loosening in monetary policy in a bid to counter gains. It was noted that significant appreciation posed a risk to growth and inflation, particularly a steep or aggressive upward push. The common currency has retreated since the meeting, bouncing off highs at 1.20, perhaps limiting the market reaction. Having touched intraday lows at 1.1735, the euro edged higher into this morning’s open and currently trades hands at 1.1758. While we expect the euro will continue to outperform through 2021, the increase in COVID-19 infections and a 2nd wave will keep gains in check.
0.7030 - 0.7230 ▲AUD/EUR:
0.6010 - 0.6150 ▲GBP/AUD:
1.7920 - 1.8180 ▼AUD/NZD:
1.0750 - 1.0950 ▲AUD/CAD:
0.9410 - 0.9490 ▲