AUD - Australian Dollar
The Australian dollar surged through 0.75 US cents through trade on Thursday, building on the weeks earlier gains to break resistance and mark fresh highs at 0.7540. The AUD climbed steadily throughout the day as rising commodity prices, led by oil and iron ore, fueled demand. Despite the Q4 retracement, expectations vaccines will facilitate a swift return to normal activity helped drive oil prices higher, while iron ore broke through $150 USD a tonne. Further support came on the back of an uptick in US jobless claims and optimism surrounding US Fiscal Stimulus negotiations, while markets continued to ignore increasing AU-China diplomatic tensions. With reports cotton and wheat have been marked for increasing import tariffs, it appears hostilities are unlikely to improve in the near term, perhaps weighing on medium and longer-term upside trends.
Having broken resistance and advanced beyond 0.75 cents the question now is, where is the top? The current risk narrative continues to fuel demand for risk assets, commodity currencies and emerging markets, propping up the AUD and driving gains amid broader USD weakness. With the long run bearish trend unlikely to fold any time soon, a consolidation above this current handle could see the AUD enter a new trading bracket between 0.75-0.78 as we move into a new year.
The US dollar was again on the backfoot through trade on Thursday, suffering losses against most major counterparts outside the British pound. Jobless claims unexpectedly rose to a 3 month high, well above market estimates and another signal the labour market is beginning to crack under the pressure of the latest economic retracement. The Coronavirus continues to wreak havoc across the US, with north of 200,000 infections and 3,000 deaths now a daily norm. Despite hopes a vaccine will facilitate a return to normal, a widespread program of immunisation won’t be available until Q2 next year, raising expectations for extensions in fiscal support and a long run period of accommodative monetary policy.
The Great British pound was the worst performer through trade on Thursday, sliding back below 1.33 against the greenback amid fears a no deal Brexit is now a reality. Boris Johnson met with European Commission President Von Der Leyen in brussels on Wednesday evening, a meeting that yielded little in the way of compromise. Key sticking points mean the EU and UK remain at loggerheads and with the deadline extended into the end of the weekend, markets began to prepare for the real likelihood a deal may not be struck. Despite the political posturing, the market still anticipate at least a partial deal will be reached, given the vested interests of all parties. This leaves the door open to a sharp correction if a deal cannot be struck before the midnight bell, signaling the end of what has been a testing and trying 2020.
The euro burst back through 1.21 amid broader US dollar weakness and an extension in ECB monetary policy. Largarde announced an expansion in the banks Pandemic Purchase Programme and an extension into 2022. The extended timeline goes beyond market expectations, yet offered little in the way of market reaction. Investors absorbed the news with little fanfare, perhaps anticipating the Bank would look to issue an aggressive and proactive platform of support amid the worst of the pandemic. Having tested 1.2160, the euro opens marginally lower at 1.2140.
0.7420 - 0.7580 ▲AUD/EUR:
0.6150 - 0.6250 ▲GBP/AUD:
1.7720 - 1.8050 ▼AUD/NZD:
1.0520 - 1.0670 ▲AUD/CAD:
0.9520 - 0.9630 ▲