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Aussie boosted by Fed commitment to dovish stance

AUD - Australian Dollar

The Australian dollar advanced through trade on Wednesday, buoyed by the Federal Reserve’s commitment to a dovish monetary policy. Having tracked lower through much of the domestic session testing a break below 0.77 US cents prior to the Fed policy update, the AUD shot through 0.7750 and 0.78 to mark intraday highs at 0.7812. Policymakers opted to maintain the current policy setting, reiterating their commitment to accommodative monetary policy. The dot plot showed that the majority of policymakers expected to maintain interest rates at record lows into 2024, prompting gains across equities and risk assets. With the risk event now behind us our attentions turn to domestic employment data. We expect the unemployment rate will show further improvement as the economy continues to rebuild. A strong read and push toward 6% could help push the AUD through resistance at 0.7820/30 and on toward 0.7850.

Key Movers

The dollar index tracked lower through trade on Wednesday, forced downward as the markets absorbed the Fed’s commitment to a dovish monetary policy. Ten year treasury rates retraced early gains sliding off 1.685 to 1.66 while equity markets trended higher unwinding early losses and pushing into positive territory.

The Great British pound broke back through 1.3950 having tested 1.3850 ahead of the Fed policy update. Sterling has struggled to extend gains beyond 1.40 and our attentions turn now to the Bank of England policy meeting this evening. We expect little change from the wait and see approach offered in recent months. That said the UK continues to lead the way in vaccinating its citizenry and with Brexit it behind there is some scope to suggest the BoE could adopt a more hawkish and optimistic tone.

Expected Ranges

AUD/USD: 0.7705 - 0.7850 ▲

AUD/EUR: 0.6450 - 0.6530 ▲

GBP/AUD: 1.7820 - 1.8080 ▼

AUD/NZD: 1.0750 1.0820 ▲

AUD/CAD: 0.9610 - 0.9730 ▲