Aussie fails to break 0.72 ahead of key US fiscal stimulus updates
Thursday 30 July, 2020
Daily Currency UpdateThe Australian dollar crept upward through trade on Wednesday amid dovish commentary from the US federal reserve and a broadly upbeat risk on tone. Having struggle to consolidate a break above 0.7150 throughout the domestic session the AUD stretched its legs overnight and appears poised to break through 0.72 before resistance and profit taking tempered gains. Having touched intraday and 15 month highs at 0.7195 the AUD has edged marginally lower into this mornings open and currently buys 0.7188 US Cents.
Attentions were squarely affixed to the Fed’s updated policy statement, which showed little change from that proffered last month as the FOMC maintained its dovish stance, committing its full suite of monetary policy tools to support the US economy. The bleak outlook added downward pressure on the world’s base currency and help consolidate the Aussie dollars upturn.
Focus now turns to talks between Republicans and Democrats as the two parties look to put partisan issues aside and agree a new fiscal stimulus plan before the current unemployment plan runs out at the end of the week. With negotiations at loggerheads there are calls for as stop gap measure to be employed ensuring benefits continue to flow while broader discussions continue. Democrats however appear reluctant to approve a stop gap facility for fear of loosing leverage in ongoing negotiations. While investors suspect an agreement will be reached before the deadline, we can expect heightened volatility Monday if an agreement is not reached.
Key MoversThe US dollar marked a fresh two-year low on Wednesday as the FED affirmed its dovish stance and offered little in the way of forward guidance. The FOMC reiterated its pledge, to commit its full suite of monetary policy tools for as long as it takes to guide the economy through the recession triggered by the COVID-19 outbreak. Fed Chair Jerome Powell painted a bleak picture as the US struggle to contain the virus and 21 States have been urged to roll back social distancing restrictions in a bid to curtail the spread and ease the pressure on the hospital system. The dollar index fell to 93.17 its lowest point since June 2018.
The Euro made fresh highs, pushing through 1.18 to touch intraday highs at 1.1805. Investors continue to dump the USD in favour of the single unit as EU fiscal support and COVID-19 containment open the door to a faster paced recovery than that likely in the US. With expectations the Fed will maintain it ultra-loose monetary policy setting well into the future the dollar outlook remains bleak. Key fundamentals that previously propped up the worlds base currency have been rapidly eroded and right now the only point of support is shifting risk demand.
The Great British Pound pushed ever nearer 1.30, touching intraday highs at 1.2995 as broad based US dollar weakness helped the embattled currency continue its recovery off June and early July lows. While Sterling has enjoyed a brief upturn, our broader view remains bearish as Brexit uncertainty and questions over the economies ability to rebound after the Pandemic weigh on the currency.
- AUD/USD: 0.7070 - 0.7220 ▲
- AUD/EUR: 0.6030 - 0.6180 ▼
- GBP/AUD: 1.7880 - 1.9220 ▲
- AUD/NZD: 1.0680 - 1.0820 ▲
- AUD/CAD: 0.9480 - 0.9620 ▲