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Aussie rallies on uptick in commodities

BY MATT RICHARDSON

The Australian dollar has extended gains overnight from yesterday’s flat trading session to reach two week highs. A range bound Aussie saw movements initially between 0.7630 and 0.7655 in the Asian session before seeing a high of 0.7675 on this morning’s open. Renewed risk appetite on commodity currencies continue to see gains for the Australian dollar. It now looks to continue its advance to test topside levels of 0.77 against the American dollar ahead of HIA new home sales data released this morning.

The New Zealand dollar edged higher through trade on Wednesday shrugging aside wider USD gains and holding on above the 0.70 handle. Having touched intraday lows at 0.6994 the Kiwi bounced off supports and moved higher into northern hemisphere trade. An uptick in commodity prices helped bolster demand for commodity driven currencies and the NZD moved to touch intraday highs at 0.7039. The Kiwi has maintained a relatively tight trading band through much of the last fortnight and appears largely range bound while market participants sit back, reluctant to extend positions before obtaining a deeper insight into the successful implementation of President Trump’s reflation policies. 

The Great British Pound saw further weakness in the Asian trading session yesterday, sold off from 1.2460 to an intraday low of 1.2380 as traders positioned themselves in preparation for the Trigger of Article 50 of the Lisbon Treaty. Despite seeing pressure early in the European session, the Sterling was resilient and saw an overnight high of 1.2470, selling on the rumour and buying on fact as Prime Minister Theresa May officially confirmed the UK will be leaving Europe in an expected timeframe of two years. Further ahead the cable cross looks towards American GDP figures for the quarter and Unemployment claims in the North American session this evening. The Sterling opens lower against the Australian dollar (1.6210), along with the New Zealand dollar (1.7670).

The U.S Dollars reversal continued through trade on Wednesday as investors looked to unwind the recent sell off and lend support to the world’s base currency. Comments from Key Fed and ECB officials highlighted the burgeoning gap between U.S and European monetary policy outlooks bolstering demand for USD and its positive yield. The ECB appears reluctant to issue wholesale amendments to its current monetary policy platform for fear of increasing borrowing costs and spooking market participants in a time of political instability, while Fed officials continue to proffer a path to tighter financial conditions. Chicago Fed President Charles Evans a renowned dove and exponent of lower interest rates supported calls for additional rate hikes throughout trade on Wednesday assuaging some investor fears the FOMC may not be singing from the same hymn sheet. Advancing back through 100 the Bloomberg dollar index was driven upward following wider Euro weakness. The 19 nation combined unit fell through 1.08 to touch intraday lows at 1.0741 as Britain’s evocation of Article 50 added to uncertainty surrounding the stability of Europe in what is already a politically unsteady landscape.