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AUD falls agonizingly short of break above 0.75

AUD - Australian Dollar

In what was otherwise an uneventful day for broader currency markets, the Australian dollar outperformed when measured against major counterparts. With little of note to drive direction, analysts steered the AUD toward intraday and 18-month highs at 0.7485 amid a delayed reaction to an upbeat and robust Westpac Consumer Sentiment report. The analysis showed consumer confidence had risen to a ten-year high, astounding when you consider the backdrop and a remarkable reflection of the optimism driving a 2021 recovery. With unemployment expected to improve throughout next year as the labour market normalises, there is a sense the RBA will be hard-pressed to maintain a neutral monetary policy program over the next 36 months. Expectations that the 2020 retracement will be unwound through 2021 and 2022 are amplifying calls for the RBA to amend forward guidance and consider raising rates before the current 3-year timeline. While we expect monetary policy will accommodate through the short term, when measured against the backdrop of other major central banks domestic optimism should help drive further AUD gains through next year.

Attentions today remain with the broader risk narrative as Brexit and US fiscal stimulus negotiations dominate the docket. Having given up the overnight high the AUD now buys 0.7438 US cents. A consolidated above 0.7450 could open the door for another run-on resistance at 0.7490/0.75.

Key Movers

The Euro shifted lower on Wednesday slipping back below 1.21 amid a broader USD recovery. Last week’s momentum and the long run US dollar downturn appear to be running out of steam, at least in the near term, forcing the single currency to give up 1.2150 ahead of today's ECB policy meeting. We anticipate the ECB will expand its monetary policy mandate in a bid to guide the broader European economy through the pandemic prompting our focus to shift to commentary surrounding the recent currency appreciation. The ECB has signalled a rapid over appreciation in the Euro which poses risks to the pandemic recovery and as such we will be keenly attuned to any signal that suggests they may intervene to depress the currency's value and protect domestic exporters.

With little else of note on the dockets, our attentions remain with Brexit and US fiscal stimulus negotiations. Boris Johnson has returned to Brussels to meet with EU leaders in a bid to rescue negotiations and push past key sticking points. The next 48 hours remain critical in shaping the Brexit narrative with time fast running out before the official divorce and break from the EU takes effect.

Expected Ranges

AUD/USD: 0.7380 - 0.7490 ▲

AUD/EUR: 0.6080 - 0.6190 ▲

GBP/AUD: 1.7880 - 1.8120 ▼

AUD/NZD: 1.0480 - 1.0630 ▲

AUD/CAD: 0.9430 - 0.9580 ▲