Treasury yields and commodity prices drive AUD toward 0.80 US cents
Tuesday 23 February, 2021
Daily Currency UpdateThe Australian dollar led gains through trade on Monday, finally breaching resistance at 0.78 US cents as reflation driven trade forced commodities and commodity currencies higher. Rates across treasuries surged with both Australian and NZ yields leading markets higher through the domestic session as investors chased higher returns, largely ignoring the RBA’s QE bond purchase announcement. The AUD eye a break above 0.79 before a moderation in price action saw the currency slip back toward 0.7860 leading into the overnight session. The AUD then tracked sideways through the middle of the night before finding another leg and bursting through 0.79 cents to mark fresh highs at 0.7930. Surging commodity prices and a weaker USD underpinned the move as expectations for reflation drive commodities higher. Copper moved through $9,000 a tonne, for the first time in almost a decade while oil advanced over 3%. Adding to the risk on push reports Pfizer’s vaccine reduces the risk of COVID 19 infection by up to 85% buoyed hopes a H2 recovery is achievable.
Having extended beyond recent ranges our attentions now turn to resistance on moves approaching 0.80. This remains an important psychological barrier and a breakthrough this handle could signal and extended rally.
Key MoversThe US dollar fell across the board Monday as the reflation theme drives a renewed demand for risk and commodity led assets. Despite an uptick across US treasury yields the world’s base currency was unable to keep pace with the Australian, NZ and Canadian rates market while Euro bond yields also enjoyed overnight gains, pushing nearer positive territory, marking highs at -0.28% before edging marginally lower into this morning’s open. The Euro pushed through 1.2150 and appeared set to break back through 1.22 before resistance at 1.2170 forestalled extended gains. The Great British Pound broke above 1.40 marking new highs at 1.4090 after UK PM Boris Johnson outlined a plan to reopen the economy. Johnson has adopted an incredibly laboured and cautious approach, with schools set to reopen on March 8th, while non-essential shops and services are to remain closed until April, with indoor hospitality shuttered until May. Despite some of restrictions likely to be in place until June, hopes the vaccine could drive a H2 recovery have helped bolster GBP expectations and we remain bullish Sterling will enjoy sustained upside as it leads its counterparts in vaccinating the population.
- AUD/USD: 0.7820 - 0.7990 ▲
- AUD/EUR: 0.6380 - 0.6550 ▲
- GBP/AUD: 1.7580 - 1.7820 ▼
- AUD/NZD: 1.0750 - 1.0830 ▲
- AUD/CAD: 0.9880 - 1.0020 ▲