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Australian dollar supported by improved risk sentiment

AUD - Australian Dollar

The Australian dollar continued its march higher as improved risk sentiment in global markets supported the local currency in overnight movements. Opening the week at 0.6855, a bullish read on new lending to households in July spurred the Aussie to intraday highs of 0.6875. July housing finance approvals rose to its highest levels in five years as a relaxation in APRA’s serviceability floors look to have been a major contributor to the underlying number.

The AUD/USD was further supported higher with a weakening of the greenback as investors positioned themselves ahead of September 18th FOMC interest rate decision. Markets are still pricing a further cut of 25bps by the federal reserve.

Next moves will be dependent on the release of NAB Business confidence levels due for release this morning. The Australian dollar is currently trading at 0.6864. We expect support levels to hold on moves approaching 0.6820, while any upward push will likely meet resistance at 69 US cents.

Key Movers

It was a quieter theme in global markets overnight as attentions turned to the UK as the Great British Pound was supported by stronger than expected GDP and Manufacturing data. Sterling moved over a full cent higher from 1.2250 and capping out at 1.2380 to start the week in positive fashion. Further news supported cable as a UK bill has been passed in the House of Lords ruling out a no-deal Brexit on October 31st and has formal approval from Queen Elizabeth II.

Equities and the greenback ended flat as it is widely expected the FOMC will provide further stimulus to the world’s largest economy in September. The CME Fedwatch tool currently has pricing at a 93.5% chance that the FOMC cuts interest rates by 25 basis points, up from 91% on Monday.

Markets are firmly focused this week on ECB’s rate decision this week as economists are calling for a 10-basis point cut to negative 0.5% on deposit rates. The Euro fell to a five-day low of 1.1015 against the dollar on early Monday morning.

Expected Ranges

AUD/USD: 0.6820 - 0.6900 ▲

GBP/AUD: 1.7800 - 1.8200 ▲

AUD/NZD: 1.0620 - 1.0720 ▲

AUD/EUR: 0.6190 - 0.6250 ▲

AUD/CAD: 0.9000 - 0.9100 ▲