Daily Currency Update

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AUD falters in face of mini-USD resurgence

AUD - Australian Dollar

The Australian dollar was unable to maintain Thursday's upturn, drifting back below 0.76 cents amid broad based US dollar strength. Speculative repositioning and adjusted expectations for monetary policy have prompted a shift in demand across currency markets, with the AUD suddenly divorced from the risk narrative driving gains across other risk assets, namely equities. Markets appear to have put the GameStop saga behind them, chasing gains and driving the S&P 500 higher overnight. The AUD failed to follow suit as investors push a mini-USD resurgence. The AUD touched intraday lows at 0.7590, before creeping back above 0.76 ahead of this morning’s open. While support remains intact on moves approaching 0.7570, we expect the AUD to maintain a narrow range between 0.7550 and 0.7690 with extensions to 0.75 and 0.7750. We anticipate gains will be hard won moving forward as risk led momentum continues to fade. Our attentions today turn to the RBA’s Statement of Monetary Policy for further insight into Tuesday's policy announcement. Should the RBA double down and push its more pessimistic and cautious tone, the AUD could well come under pressure leading into US non-farm payrolls and the weekly close.

Key Movers

The revived US dollar maintained its recent upward momentum through trade on Thursday as markets continue to adjust previously shorted positions. Despite a resurgence in risk demand this week, the dollar advanced against all major counterparts, bar the Great British pound, pushing the dollar index another half percent higher overnight, marking the highest close since the end of November. Dollar demand was helped by ongoing euro downside, as the common currency was again under pressure on Thursday slipping below the psychological 1.20. Speculative repositioning on the back of a sluggish vaccine roll out has seen the euro shift sharply off highs above 1.23 toward an overwhelming bearish bias. There is an expectation Europe's slow pace of immunisation will see it struggle to keep pace with both the UK and US, prompting further divergence in growth expectations as the recovery builds momentum. The Great British pound outpaced all majors, buoyed by an upbeat Bank of England (BoE) tone. The BoE proffered an optimistic outlook, suggesting the vaccine roll out and easing COVID case numbers would prompt a rapid economic recovery. While the Bank insisted regulators prepare the industry for negative rates, market expectations for a rate cut were tempered with less than 4 basis points of cuts priced in through the next 12 months. Having touched intraday lows at 1.3575 ahead of the policy update, sterling surged back through 1.3650, stopping just short of a break above 1.37.

Our attentions today turn to US non-farm payroll numbers. With weekly unemployment claims uncomfortably high, this months print will afford a valuable insight into the health of the US labour market, decimated by COVID-19.

Expected Ranges

AUD/USD: 0.7550 - 0.7690 ▼

AUD/EUR: 0.6290 - 0.6420 ▲

GBP/AUD: 1.7780 - 1.8120 ▲

AUD/NZD: 1.0550 - 1.0650 ▲

AUD/CAD: 0.9680 - 0.9790 ▲