AUD rebounds after markets retrace post-election gains and Fed cuts rates
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Daily Currency Update
The Australian dollar rallied through trade on Thursday amid a broadly weaker US dollar as investors set about reversing some moves seen in the wake of the Trump election victory. After markets jumped behind the USD following President-elect Trump’s historic win, gains were short-lived and investors began unwinding positions through trade today, allowing the AUD to climb back through US$0.66.While the promise of lower taxes and deregulation have helped fuel a surge across the S&P 500 and the Nasdaq, a correction in US treasury yields following a 25-basis point rate cut issued by the Federal Reserve helped fuel the AUD recovery. Among the best performers on the day, the AUD is up over 1.5% on this time yesterday, having touched session highs just short of US$0.6690.
With the election and Fed meetings now behind us, our attentions turn to China and commentary coming from the China National Peoples Congress, particularly after a strong uptick in October export data. We are keenly attuned to officials response to the US election result and what stimulus measures will be enacted to help fight expected tariffs and rebuild China’s flat lining economy. Extensive and robust fiscal support could help propel AUD gains through US$0.67 leading into the weekly close.
Key Movers
The US dollar moved lower through trade yesterday as investors set about capitalising on post-election gains and squaring positions. After rallying 1.6% following the Trump victory, the DXY index gave up near half its gains, falling 0.7% through Thursday. With US treasury yields moving lower following the Fed’s 25-basis point rate cut, the yen found support while the euro shrugged aside concerns surrounding the breakdown of Germany’s government and announcement of an early election jumping back through 1.08.In the UK, the Bank of England cut its policy rate by 25-basis points to 4.75%. The pound was largely unaffected as the decision was well forecast. Instead, commentary from Governor Bailey affirmed bets for just two more rate cuts through to June 2025. The UK budget has ensured the retracement of inflation pressures has stalled and is now not expected to fall below the 2% target until Q2 2027, meaning rates will likely be higher for longer. With the USD on the back foot, the GBP tested a break above 1.30, before edging lower to open this morning at 1.2980.
Expected Ranges
- AUD/USD: 0.6500 - 0.6700 ▲
- AUD/EUR: 0.6080 - 0.6220 ▲
- GBP/AUD: 1.9200 - 1.9600 ▼
- AUD/NZD: 1.1050 - 1.1120 ▲
- AUD/CAD: 0.9150 - 0.9300 ▲