Daily Currency Update

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AUD gives up assault on 0.76 as market sentiment wobbles

AUD - Australian Dollar

Currency markets offered little to excite investors through trade on Monday, with the AUD tracking sideways through much of the session, having failed to breach resistance on approaches to 0.7580/0.7590. With little of note on the domestic macroeconomic docket attentions remained with the broader risk narrative. Hopes a no-deal Brexit may still be avoided following an extension in negotiations amid signs of compromise, and a boost to expectations surrounding US fiscal stimulus helped drive risk assets higher through the start of the week. The AUD touched intraday highs at 07580 before profit taking and resistance forced it back below 0.7550 toward short term support at 0.7530. While the underlying risk narrative remains intact market sentiment was dented in the early hours of the morning following reports London and New York are set to move to tighter lockdowns. America now joins the UK as one of the first countries to approve Pfizer’s COVID19 vaccine and begin immunizing its citizen’s. With the broader focus on the optimism surrounding such programs the new lockdown restrictions serve as a stark reminder we still have a long way to go before a return to normal and a post pandemic world.

Attentions today remain with the risk narrative with nothing of note outside the RBA minutes on the macroeconomic docket. We expect few surprises from the central banks meeting account and anticipate the long run USD downturn and higher commodity prices will continue to fuel AUD gains as the string of higher highs and higher lows continue.

Key Movers

Moves within currency markets were relatively modest through trade on Monday As the risk narrative continues to bubble along amid a lack of any new or meaningful headlines. Reports a no- deal Brexit was still “possible” helped fuel GBP gains and saw Sterling erase last weeks losses following an extension in negotiations. Signs both parties are willing to compromise after intensive talks at the weekend elevated hopes policy makers will not allow the end of year deadline to arrive without at least a partial trade agreement. The Pound jumped back through 1.33 and extended toward intraday highs at 1.3450 as the USD made new 30 month lows. The dollar index cratered in the early part of the overnight session, driven lower by gains across risk assets and an uptick in both the GBP and EUR. Having marked a new low the USD then found support as investors consolidated gains on reports new lock down measures would be introduced in New York and London. Sterling gave up much of its early gains and shifted back to 1.3325 while the Euro assault on 1.22 fell short.

Attentions remain affixed to key risk events and headlines with Brexit and US fiscal stimulus continuing to drive the broader narrative.

Expected Ranges

AUD/USD: 0.7480 - 0.7590 ▼

AUD/EUR: 0.6180 - 0.6250 ▼

GBP/AUD: 1.7580 - 1.7820 ▲

AUD/NZD: 1.0580 - 1.0690 ▼

AUD/CAD: 0.9580 - 0.9650 ▼