Daily Currency Update

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AUD closing in on a break back above 0.78 US cents

AUD - Australian Dollar

The Australian dollar tracked higher through trade on Thursday, pushing through 0.7750 and nearer 0.78 US cents. Improved risk demand helped drive gains across asset classes with the S&P 500 and NASDAQ recording strong gains, dragging the AUD higher. With little of note on the domestic ticket our attentions turned to the ECB’s monthly policy update. While policy makers elected to maintain the current programme of support, they did pledge to frontload bond purchases moving forward. The promise to increase bond purchases through the short term helped drive bond rates lower, fueling risk demand and helping the AUD touch intraday highs at 0.7793.

Having bounced off lows at 0.7620, the AUD appears to have staved off any immediate threat of a broader downturn. With price action across bond rates and treasury yields moderating and risk appetite returning, the door is again open for the AUD to make another run toward 0.80 US cents. With resistance on moves approaching 0.78 and 0.7830, we expect a more measured appreciation this time round with direction today guided by broader risk flows.

Key Movers

The US dollar retreated through trade on Thursday, giving up ground to all counterparts bar the safe haven Japanese yen. The Dollar Index fell a further 0.5% overnight having lost over 1% now through the last three days. A return in risk demand and correction in treasury yields appears to be the catalyst behind the downturn this week.

The euro edged back toward 1.20, advancing in wake of the ECB’s policy update. The single currency fell to intraday lows at 1.1920 leading into the bank’s monthly update, before pushing toward intraday highs at 1.1990 after ECB president Lagarde promised to frontload bond purchases through the short term. The commitment to increase the pace of bond purchases past the current 60bn helped drive down bond rates. The correction in bond rates coupled with modest long run inflation expectations and a commitment to accommodative monetary policy helped drive risk gains.

With little of note on today’s domestic ticket we expect underlying risk flows to govern direction into the weekly close.

Expected Ranges

AUD/USD: 0.7690 - 0.7820 ▲

AUD/EUR: 0.6430 - 0.6510 ▲

GBP/AUD: 1.7820 - 1.8180 ▼

AUD/NZD: 1.0680 - 1.0820 ▲

AUD/CAD: 0.9720 - 0.9810 ▲