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AUD tumbles as COVID infections rates soar and US political uncertainty grows

AUD - Australian Dollar

Having tracked sideways for much of the domestic session the AUD fell sharply overnight testing support at 0.72 US cents following a broad risk off shift. The Australian dollar followed equities and risk assets lower as investors sought the safety of bonds and haven currencies amid growing uncertainty and a rise in COVID 19 infections. A spike in cases across Europe has prompted calls for renewed lockdown measures with France, the UK and Spain all introducing targeted social distancing protocols while the US 14 day moving average pushed higher, suggesting a spike in new infections, with daily cases numbers again nearing 40,000. Fears heightened restrictions will cripple the broader economic recovery coupled with uncertainty surrounding the US election and the appointment of a new Supreme Court Justice following the passing of Ruth Bader Ginsburg at the weekend has forced investors adjust the overall risk tone and drive the AUD off intraday highs above 0.73.

With support intact at 0.72/0.7190 the AUD edged higher into this morning open having touched 0.7199 and currently buys 0.7221 US cents. Having touched highs above 0.74 just last month the recent correction in risk demand suggest further upside through the short term will likely be hard won. With uncertainty growing we anticipate a period of consolidation leading into the US election with the bias skewed to the downside amid shifting market sentiment.

Attentions today turn to RBA deputy Guy Debelle as he addresses key industry groups. Investors will be keenly attuned to any hint a change in monetary policy may be forthcoming.

Key Movers

The US dollar outperformed overnight, dragging its haven counterparts higher as markets sought safety amid growing economic and political uncertainty. The S&P 500 looks to set to decline for a fourth consecutive week, leading global stocks lower amid fears a second wave of COVID 19 infections will cripple any further economic recovery. Case numbers in the US appear to be on the rise again while increasing political tensions add to the doubt and indecision creeping into financial markets. The Dollar found further support following the death of Ruth Bader Ginsburg. The Supreme Court Justice was an avid liberal and her passing has opened the door For Donald Trump and the Republicans to push through a new conservative nominee ahead of the November Election. If successful, the Republicans will ensure a conservative majority on the supreme court for decades to come. A crucial political win given the Courts role in shaping American culture.

With markets likely to be plagued by heightened ambiguity leading into the Presidential Election we expect a period of short term consolidation for the worlds base currency with shifting risk sentiment opening the door to additional upside gains.

Expected Ranges

AUD/USD: 0.7190 - 0.7320 ▼

AUD/EUR: 0.6020 - 0.6180 ▼

GBP/AUD: 1.7520 - 1.7880 ▼

AUD/NZD: 1.0780 - 1.0920 ▲

AUD/CAD: 0.9550 - 0.9650 ▼