Aussie ticks higher as interest rates on hold and risk demand improves
Wednesday 5 February, 2020
Daily Currency UpdateAUD - Australian DollarThe Australian dollar edged higher through trade on Tuesday, pushing back through 0.67 US cents following the RBA’s monetary policy announcement. As expected, policy makers opted to leave rates on hold and while acknowledging the bushfires and coronavirus will likely have a dampening effect on domestic economic growth through the year ahead the board maintained optimistic expansion forecasts. The AUD jumped to touch 0.6725 and held gains through the European and North American trading day as demand for risk improved. Market concerns surrounding the coronavirus eased bolstering equities and underpinning the AUD uptick while firming supports at 0.6680.Attentions now turn to RBA Governor Lowe for further monetary policy direction and colour surrounding the Central Banks outlook. We’d expect Lowe to maintain much the same narrative, however with such a tumultuous start to 2020 investors will be looking for any indication the RBA will look to immediately extend its easing bias. Watch supports at 0.6680 with resistance on moves approaching 0.6730/50.
Key MoversSafe haven’s underperformed through trade on Tuesday as demand for risk improved following reduced fears surrounding the economic and market impact of the coronavirus. The Yen and Swiss Franc retreated for the 2nd consecutive day as measures from Chinese and Global health officials to contain the outbreak seemingly dampened broader fears. The USD advanced against the Yen up seven tenths of one percent, while the Swiss Franc fell 0.3% as the People’s Bank of China continued to pump funds into the economy in a bid to maintain economic liquidity and stabilise the market. Attentions remain with coronavirus updates while US domestic politics takes centre stage. Results in the Iowa democratic caucus are expected to filter through today with a win for Bernie Sanders or Elizabeth Warren could hurt shares and foster a shift toward safe haven currencies. The Great British Pound recouped some of the weeks earlier losses following stronger than expected construction data. The surprise uptick offset recent fears of a hard Brexit and helped propel Sterling back through 1.30. Attentions remain with Brexit trade talks as the primary driver governing Sterling direction. As long as the EU and UK continue to clash over the structure off a post Brexit trade deal we expect both the GBP and Euro to experience headline volatility with support on moves below 1.2950/1.29 and resistance on extensions toward 1.3180/1.32.
- AUD/USD: 0.6680 - 0.6780 ▲
- AUD/EUR: 0.6030 - 0.6130 ▲
- GBP/AUD: 1.9250 - 1.9550 ▼
- AUD/NZD: 1.0350 - 1.0450 ▲
- AUD/CAD: 0.8880 - 0.8980 ▲