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AUD range bound as attentions turn to unemployment

Daily Currency Update

The AUD opens in much the same position this morning having tracked sideways through trade on Wednesday. Despite weakness across US domestic data sets and a broader dollar correction the AUD struggled to maintain any upward momentum bouncing between 0.7155 and 0.7190. The AUD remains vulnerable to broader corrections in the risk narrative, fluctuating in response to changes in market sentiment, driven by global growth and fiscal stimulus expectations and equity performance. Investors have maintained a cautious tone through much of the week relinquishing Friday’s risk on advance as hopes for a US fiscal rescue package and the release of a COVID vaccine before the end of the year fade. Having corrected off year to date highs in early September the AUD is now very much range bound bouncing between 0.71 and 0.7230 with broader support and resistance handles at 0.70/0.7020 and 0.74. With the resurgence of new COVID-19 infections across Europe and the US election creating a heightened level of uncertainty it will be difficult for the AUD to extend beyond current handles.
Attentions today turn to domestic employment data. Analyst anticipate the unemployment rate will rise to 7.0%, a sobering reminder of just how devastating the pandemic has been. A poor read will all but sure up an RBA rate adjustment next month and may weigh on the AUD, prompting a break below 0.71.

Key Movers

The USD gave up gains enjoyed through Tuesday, slipping off three-week highs amid shifting US fiscal stimulus expectations. The dollar is very much range bound at present, driven by fluctuations in the broader risk narrative, fueled by expectations for stimulus and a COVID19 vaccine. It is becoming increasingly unlikely a fiscal support package will be made available ahead of the November 3 election, leaving significant funding gaps in key support programs across the US, leaving millions of Americans struggling under the weight of the COVID-19 virus. With consumer confidence evaporating, the engine room of the US economy is fast running out of steam and the longer congress delays a rescue package the deeper the recession.
The Great British Pound edged back above 1.30 through trade on Wednesday following comments from key British officials suggested progress had been made. Having touched lows at 1.2865 on fading hopes of a trade deal prior to the comments Sterling then surged through 1.30 to touch intraday highs at 1.3050. The pounds fortunes are squarely affixed to the Brexit outcome this week with the impacts of the resurgent coronavirus taking a back seat. We expect the currency will continue to fluctuate in response to headline updates as talks progress. If differences can be set aside and an 11th hour deal brokered then an extended run beyond 1.30 is more than likely.

Expected Ranges

  • AUD/USD: 0.7020 - 0.7230 ▲
  • AUD/EUR: 0.6030 - 0.6180 ▲
  • GBP/AUD: 1.7880 - 1.8320 ▲
  • AUD/NZD: 1.0710 - 1.0850 ▼
  • AUD/CAD: 0.9380 - 0.9450 ▲