AUD - Australian Dollar
The Australian dollar continued its upward extension, pushing through 0.78 US cents on Wednesday amid broader US dollar weakness following early results in the Georgia senate race. The AUD capitalised on reports that the Democrats appeared likely to win both races after Raphael Warnock beat Republican incumbent Kelly Loeffler and Jon Ossoff appeared likely to prevail over David Perdue. The blue wave sees Democrats wrest control of both arms of government opening the door to increased fiscal stimulus and a burgeoning deficit. Markets anticipate sustained USD weakness in the wake of these results. Increased COVID-19 aid within the US should help drive the global recovery propping up the AUD and other risk assets, while a falling bond market and widening trade and budget deficit will likely weigh on the world’s base currency. Having touched intraday highs at 0.7820 the Australian dollar edged back below 0.78 into this morning’s open as markets looked to move toward haven assets following reports Trump supporters had forced themselves into the Capitol building in a last-ditch attempt to thwart the confirmation of Election results.
As we look ahead our attentions now turn to the next point of psychological resistance; 0.80 US cents. With the Australian economy relatively free from the constraints of COVID-19 and positive sentiment continuing to outweigh near term headwinds we would anticipate little in the way of resistance in chasing down this handle. While there is scope for a short-term reprieve on US dollar weakness, the downturn is still very much intact, and we expect sustained softness through the medium term allowing the AUD to extend gains through Q1.
The US dollar tested three-year lows through trade on Wednesday as Democrats appeared on the cusp of winning both senate seats in Georgia and wresting control of the house and senate, paving the way for increased stimulus and deficit. The dollar index hit its lowest level since March 2018 and looks poised to break below 89 having touched 89.206. The dollar then managed to claw back some of the day’s losses as demand for risk assets faltered following reports protesters in Washington D.C had stormed the capital in a last ditch attempt to overrun the confirmation and certification of election results. The Euro having eyed a move above 1.2350 slipped back to 1.2310 while Sterling shifted off levels approaching 1.37 to slip back below 1.3550. The pound has struggled to extend gains beyond resistance at 1.37 as investors square positions amid concerns new COVID-19 restrictions will further derail the near-term recovery. Bullish bets have faltered, or at the very least slowed, through the last 7 days as expectations new national lockdowns will knock a further 10% off GDP forecast and the Bank of England will be forced to ease monetary policy before the middle of the year. We anticipate a period of consolidation as markets remain cautious as to the outlook with markets looking to the effects of lockdown measures for further guidance.
0.7720 - 0.7850 ▲
0.6280 - 0.6350 ▲
1.7280 - 1.7580 ▼
1.0630 - 1.0750 ▼
0.9820 - 0.9930 ▲