AUD vulnerable as risk sentiment sours

Daily Currency Update

The Australian Dollar opens lower this morning, falling overnight as the US dollar recoups early week losses. Having touched intraday highs at 0.6522 the AUD fell back through 0.65 following commentary from Federal Reserve Chairman Jerome Powell, wherein he rejected the prospect of negative interest rates. Powell struck a dovish and downbeat tone when assessing the economic outlook suggesting the US economy was only at the beginning of an extended period of weak growth. Despite the gloomy outlook investors unwound bets for negative interest rates, propping up the USD and forcing the AUD toward intraday lows at 0.6437.
Risk continues to drive direction and with concerns of longer lockdowns amid a 2nd wave of infections weighing on markets, moves beyond 0.6530/0.6550 remain hard won through the short term. With the virus continuing to cloud long term forecasting the AUD remains vulnerable to ongoing shifts in the broader risk narrative. Concerns countries like the US may be relaxing social distancing restrictions too early are building prompting many investors to begin pricing in an extended economic downturn giving up hopes of a swift rebound in growth prospects.
Attentions today turn to domestic unemployment and labour market numbers. With almost 600,000 jobs expected to have been lost from the economy and the unemployment rate tipped to reach 8.3%, todays print offers an invaluable insight into the scale of damage caused by the coronavirus through the peak of social distancing measures.