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AUD recovers losses as rout on equities abates

Daily Currency Update

The Australian dollar rallied through trade on Wednesday, recouping losses and pushing back toward 0.73 US cents. Having struggled to maintain any upward momentum throughout the domestic session the risk-off backdrop abated overnight allowing the AUD to follow equities and other risk assets higher. Having touched intraday lows below 0.72 the AUD pushed through 0.7250 to touch 0.7290. With little of note driving the move it is clear sentiment continues to govern direction, while underlying macroeconomic fundamentals continue to take a back seat. With investors responding to headlines rather than data sets there is heightened likelihood of ongoing volatility across currency markets as we move into the final quarter. We still expect the AUD to hold onto recent gains and test new highs as positive sentiment continues to fuel demand.
Attentions today domestic inflation expectations and US unemployment claims as markers of economic health. A break back above 0.73/0.7310 could help fuel another run toward 0.74.

Key Movers

The US dollar slipped off four-week highs on Wednesday amid improved risk sentiment and a Euro upside. The singe currency found support Tuesday ahead of today’s ECB policy meeting. Reports emerged ECB policy makers were confident in the state of the European recovery and optimistic the regions recovery is on track. With little change expected in regional forecasts we expect minimal changes in the official outlook, allowing the ECB to maintain the current program of QE. With the risk of a dovish surprise removed the Euro pushed back through 1.18 to touch intraday highs at 1.1831 before edging lower into this morning open.
The Great British Pound struggled to respond to the improve risk backdrop as fears new British legislation on post Brexit plans would derail Brexit talks. Despite a statement from EU official confirming they would not suspend talks at this point the pound failed to break back above 1.30. As talks continue we anticipate heightened GBP volatility with investors adjusting expectations for a trade agreement.
Attentions today remain squarely affixed to the ECB press conference with little else of note on the macroeconomic docket, while equity performance and broader market sentiment will continue to drive direction.

Expected Ranges

  • AUD/USD: 0.7190 - 0.7360 ▲
  • AUD/EUR: 0.6080 - 0.6230 ▲
  • GBP/AUD: 1.7720 - 1.8080 ▼
  • AUD/NZD: 1.0850 - 1.0950 ▼
  • AUD/CAD: 0.9480 - 0.9620 ▲