AUD sharply lower as rate cut looms
Wednesday 7 October, 2020
Daily Currency UpdateAUD - Australian DollarThe Australian dollar tracked lower through trade on Tuesday, giving up 0.72 US cents amid dovish RBA expectations and a consolidation across equities and risk assets. Having drifted sideways through much of the domestic session the AUD enjoyed a brief upward turn in the wake of the RBA’s policy meeting and rate statement. Policymakers elected to leave interest rates at 0.25% allowing the AUD to jump through 0.72 to touch 0.7210 before a suitably dovish statement paved the way for a 15-basis point cut and additional Quantitative Easing measures come November. The promise of lower interest rates and a QE Programme targeting 5- and 10-year bonds forced the AUD lower, driving a half cent decline to 0.7150. Having consolidated at this handle the Australian dollar came under added pressure as risk sentiment flat lined following confirmation President Trump and Republicans have withdrawn from Coronavirus relief talks. Optimism a fiscal relief package would be struck before the election had helped drive risk demand through the last week and the recent about face all but certainly dashes any hope of short-term support for American’s struggling with the effects of the COVID-19 Pandemic. The last-minute risk off shift sees the AUD clinging to 0.71 at the time of writing as attentions turn to the FOMC’s meeting minutes for guidance on Fed policy and a potential marker for added monetary stimulus. We expect the AUD will continue to trade between 0.7020 and 0.7230 as market sentiment fluctuates.
Key MoversThe US dollar recouped some of the week’s early losses through trade on Tuesday edging upward as markets looked to consolidate recent gains amid a shift in risk sentiment. Having crept upward the world's base currency enjoyed strong gains as investors rushed to exit equities and hold haven assets following President Trump's surprise withdrawal from COVID-19 fiscal relief talks. The expectation of government led support has been a key driver behind positive sentiment in recent months and the abrupt about face has dashed any hope a relief plan will be available ahead of the election, extending the timeline of hardship for millions of Americans and sapping the market of risk demand. The Great British Pound drifted lower following commentary from the EU affirming it will not make Brexit concessions ahead of next weeks EU summit. With Boris Johnson earmarking the summit as the deadline for a Brexit trade deal time is fast running out and while the market largely expects an 11th hours deal will be struck negative headlines will weigh heavily on the Pound in the lead up to the meeting of leaders. With resistance on moves approaching 1.30 attentions remain squarely affixed to Brexit development in determining both short and long term direction.
- AUD/USD: 0.7030 - 0.7220 ▼
- AUD/EUR: 0.6010 - 0.6130 ▼
- GBP/AUD: 1.7920 - 1.8280 ▲
- AUD/NZD: 1.0720 - 1.0830 ▲
- AUD/CAD: 0.9380 - 0.9550 ▼