Broad based US weakness helps consolidate push above 0.70
Tuesday 9 June, 2020
Daily Currency UpdateThe Australian Dollar extended its recent upturn, consolidating a break above 0.70 US cents on Monday. Equity markets and a sustained risk on move dragged the currency higher, while broad based US dollar weakness helped mark fresh highs at 0.7029. With much of the country enjoying an extended long weekend in observance of the Queen’s birthday the AUD took its cues from offshore risk flows, while reports New Zealand is now COVID-19 free and moving to level 1 restrictions helped bolster demand and drag the AUD higher still. The AUD advanced against the USD, GBP and EURO while giving up ground against the NZD, JPY and CHF. The correction against the JPY and CHF suggest the weeks early moves weren’t driven by typical risk on dynamics rather mounting USD uncertainty. With recent gains pushing the top-end of short term models we expect some resistance on moves beyond 0.70. That said the AUD advance can be supported by improving fundamentals and as the Australian economy looks set to rebound at a faster pace than first anticipated there is scope to suggest further upside in the medium term.
Attentions this week remain with risk drivers while the Fed and FOMC policy meeting Wednesday dominates the macroeconomic docket.
Key MoversThe US dollar remains under pressure, slipping against all major counterparts through trade on Monday. The Japanese Yen and Swiss France both enjoyed strong gains, recovering much of lasts weeks losses and topping gains across majors for the day. The upturn for the JPY and CHF suggests Monday’s move was not a typical risk on shift but rather broad-based USD weakness. With the US struggling to contain the coronavirus and Congress slow to deliver Fiscal support investors are moving away from the USD as the safe haven dynamic shifts.
The Euro continues to enjoy sustained upside support, holding near 1.13 on open this morning, while the GBP advanced four tenths of a percent pushing toward 1.2750. Despite its own underlying instability, the GBP has enjoyed strong gains through the last month, bouncing off lows at 1.2080. Given the broad-based USD weakness a better measure or Sterling is its performance against key crosses. The GBP has plunged against both the NZD and AUD while Euro/pound despite moderating through the start of June is up almost 2 cents since the start of May. The Coronavirus continues to plague the UK, and while they reported the lowest number of fatalities since the March lockdown began, 55 people still lost their lives to COVID-19 a number much to high if restrictions are to see any meaningful easing. As the UK struggles to throw off the coronavirus and Brexit looking ever larger there is little to drive GBP upside through the medium term.
Attentions today remain with risk and broad-based US direction ahead of tomorrow FOMC meeting and Fed policy announcement.
- AUD/USD: 0.6820 - 0.7080 ▲
- AUD/EUR: 0.6020 - 0.6280 ▲
- GBP/AUD: 1.7920 - 1.8250 ▼
- AUD/NZD: 1.0650 - 1.0780 ▼
- AUD/CAD: 0.9280 - 0.9420 ▲