Risk and uncertainty hinder markets

OFX Daily Market News

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USD – United States Dollar

While record levels of fiscal and monetary policy support have helped foster a positive risk backdrop, the uptick in COVID-19 cases and added geopolitical uncertainty are weighing on upward risk-on moves in the currency markets.

The S&P 500 drifted lower as risk appetite faltered following a surge in coronavirus cases and a Supreme Court ruling that will allow prosecutors access to President Donald Trump’s financial records.

While the Supreme Court ruling adds further political uncertainty, the surge in new coronavirus infections is more immediately concerning. 60,000 new cases were reported on Wednesday with over 900 fatalities recorded, the biggest daily death rate since early June. With COVID-19 spreading across the US, hopes of a full-scale re-opening are rapidly fading as states and governors rush to re-impose social distancing restrictions in a bid to contain the spread and ease the burden on the healthcare system.

The dollar index is down three tenths of a percent from yesterday’s close. The euro, pound, Australian dollar and Canadian dollar are all up this morning against the dollar.

Key Movers

The Australian dollar drifted lower through trade on Thursday, having failed to extend the weeks early uptick and push through 0.70 US cents. The AUD traded sideways for much of the domestic session, maintaining a 25-point range and bouncing between 0.6973 and 0.6996, before shifting back toward 0.6950 as risk appetite faltered. Markets shifted focus toward haven assets, following a ruling by the US supreme court that will allow New York prosecutors access to President Trump’s financial records. Equities and risk correlated currencies were forced lower in the minutes following the verdict as the possibility for further political instability added to the environment of uncertainty.

After UK Chancellor of the Exchequer Rishi Sunak’s statement on Wednesday, sterling rose across the board. Investors welcomed the extra fiscal stimulus. GBP/USD topped out at around 1.2670, however has since fallen back as risk-off trade sees a flight to haven assets. Its cause wasn’t aided by the EU’s chief Brexit negotiator advising that there were still big gaps between the two sides after its latest round of talks. We can expect Brexit to have a bigger influence on sterling’s value the deeper we go into 2020, especially from September onwards.

Expected Ranges

USD/CAD: 1.356 – 1.362 ▼

USD/AUD: 1.435 – 1.443 ▼

GBP/USD: 1.257 – 1.266 ▼

EUR/USD: 1.125 – 1.132 ▼


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Aussie drifts lower as risk appetite falters

OFX Daily Market News

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AUD – Australian Dollar

The Australian dollar drifted lower through trade on Thursday, having failed to extend the weeks early uptick and push through 0.70 US cents. The AUD traded sideways for much of the domestic session, maintaining a 25 point range and bouncing between 0.6973 and 0.6996, before shifting back toward 0.6950 as risk appetite faltered. Markets shifted focus toward safe haven assets, following a ruling by the US supreme court that will allow New York prosecutors access to President Trump’s financial records. Equities and risk correlated currencies were forced lower in the minutes following the verdict as the possibility for further political instability added to the environment of uncertainty.

Risk continues to drive direction and while the record levels of fiscal and monetary policy support have helped foster a positive risk backdrop, the uptick in COVID-19 cases and added geopolitical uncertainty are weighing on upward risk-on moves. While we expect the record centralised support packages will continue to support the global economy and the AUD, an extension beyond 0.70 requires a renewed risk driven push. Having surged through April and May, broader optimism has stalled and ranges across currency markets have narrowed considerably. We anticipate the AUD will remain range bound through the short-term, bouncing between support and resistance handles as the ebb and flow of risk demands follows the shifting COVID-19 led narrative.

Key Movers

The US dollar advanced through trade on Thursday, bouncing off 4 week lows amid uncertainty across equity markets and a broader shift in risk demand. The S&P 500 drifted lower as risk appetite faltered following a surge in Coronavirus cases and a Supreme Court ruling that will allow prosecutors access to President Trump’s financial records. While the Supreme Court ruling adds further political uncertainty, the surge in new coronavirus infections is more immediately concerning. 60,000 new cases were reported on Wednesday with over 900 fatalities recorded, the biggest daily death rate since early June. With COVID-19 spreading across the US, hopes of a full scale re-opening are rapidly fading as States and Governors rush to re-impose social distancing restrictions in a bid to contain the spread and ease the burden on the healthcare system. The dollar index rallied three tenths of a percent and opens this morning back above 96.50 at 96.75.

The euro retreated through Thursday, giving up one month highs amid the broader risk off move. Having touched 1.1370 the combined currency retreated, moving back below 1.13 before finding support at 1.1280.

Attentions remain affixed to the broader risk narrative and with little of note on the macroeconomic docket we expect the ebb and flow of risk demand will continue to drive direction.

Expected Ranges

AUD/USD: 0.6800 – 0.7000 ▼

AUD/EUR: 0.6120 – 0.6180 ▲

GBP/AUD: 1.7980 – 1.8220 ▲

AUD/NZD: 1.0550 – 1.0680 ▼

AUD/CAD: 0.9410 – 0.9480 ▲


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Dollar swings up on jobless claims

OFX Daily Market News

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USD – United States Dollar

The US dollar strengthened against the Canadian dollar, euro and British pound this morning after US jobless claims were lower than expected.

Economists forecast 1.37 million claims, and the US Department of Labor reported 1.31 million unemployment claims.

The number of new unemployment claims in the US has decreased each week since April 9. It’s a positive sign for the dollar when unemployment figures come in less than the forecast. As we’ve seen the market fluctuate each week, unemployment claims are one of the earliest economic indicators.

Key Movers

The Great British pound rallied through trade on Wednesday, pushing through 1.26 following news of a new 30 billion-pound fiscal stimulus package. Chancellor of the Exchequer Rishi Sunak unveiled plans for the new fiscal support program. It’s designed to drive and support the property market, while underpinning key retail and service sectors. He proposed it will provide tax incentives for employers to hold onto employees through this crisis. The plan is the next stage in the government’s fiscal response to the economic destruction caused by COVID-19, fueling market demand for the GBP.

The euro was dragged higher by Sterling’s upturn, pushing back through 1.13 to touch intraday highs at 1.1330, while the USD tumbled to a two-week low. Reduced haven demand drove commodity currencies higher, while extended fiscal stimulus helped support the GBP and euro. These move members forced the DXY dollar index half a percent lower. With the US still the epicenter of the world’s fight against COVID-19, investors are conscious that the world’s largest economy faces a protracted recovery period, fueling demand for other asset classes with nothing but haven demand propping up the world’s base unit.

Expected Ranges

USD/CAD: 1.349 – 1.357 ▲

EUR/USD: 1.129 – 1.137 ▲

GBP/USD: 1.257 – 1.266 ▲

USD/AUD: 1.429 – 1.437 ▲


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AUD falters again on approach to 0.70 US cents

OFX Daily Market News

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AUD – Australian Dollar

The Australian dollar crept higher through trade on Wednesday, buoyed by a softer USD and an uptick across equities and commodity prices. Having traded sideways through much of Wednesday the AUD regained upward momentum, again closing in on 0.70 US cents. The AUD touched intraday highs at 0.6985 but failed to extend the advance as global risk demand faltered and reports emerged that two new cases of COVID19 have been found in the ACT after two travelers returned home from Melbourne.

Resistance on moves approaching 0.70 seems firmly intact with the AUD struggling to break outside the 0.68 – 0.70 range through the last month. Markets continue to weigh the promise of a swift economic rebound against the spectra of rising COVID19 cases and a protracted economic rebuild. A renewed surge in risk demand is required for the AUD to push back through 0.70 US cents, while a flight to safety should test recent lows. With COVID19 still spreading without resistance the promise of a swift rebound through the latter half of 2020 is fading as it is increasingly likely social distancing restrictions will need to remain in place through the foreseeable short term. While fiscal and monetary policy continue to prop up risk assets the battle between risk demand and fundamental drivers will continue.

Key Movers

The Great British Pound rallied through trade on Wednesday, pushing through 1.26 following news of a new 30billion pound fiscal stimulus package. Chancellor of the Exchequer, Rishi Sunak, unveiled plans for new fiscal support program designed at driving and supporting the property market, while underpinning key retail and service sectors and providing tax incentives for employers to hold onto employees through this crisis. The plan is the next stage in the governments fiscal response to the economic destruction caused by COVID19 , fueling market demand for the GBP.

The Euro was dragged higher by Sterling’s upturn pushing back through 1.13 to touch intraday highs at 1.1330, while the USD tumbled to a two week low. Reduced safe haven demand drove commodity currency higher, while extend fiscal stimulus helped support the GBP and Euro, forcing the DXY dollar index half a percent lower. With the US still the epicenter of the worlds fight against covid19 investors are conscious that the worlds largest economy faces a protracted recovery period, fueling demand for other asset classes with nothing but haven demand propping up the worlds base unit.

Expected Ranges

AUD/USD: 0.6800 – 0.7020 ▲

AUD/EUR: 0.6080 – 0.6220 ▲

GBP/AUD: 1.7980 – 1.8120 ▼

AUD/NZD: 1.0580 – 1.0650 ▲

AUD/CAD: 0.9380 – 0.9480 ▼


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Vaccine optimism pushes dollar down

OFX Daily Market News

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USD – United States Dollar

The US dollar traded lower against the Canadian dollar, British pound and the euro surrounding the progress of the COVID-19 vaccine.

As has become the common pattern, a drug company announced progress in its vaccine development and currency markets dropped while equity markets bounded up. This time, Moderna Therapeutics announced that it had completed trial enrollment for a phase 2 study. The company said that its on track to launch phase 3 in July and deliver 1 billion doses in the beginning for 2021. US equity markets climbed while the US dollar lowered this morning.

In actual economic news, US Crude Oil inventories were nearly double the forecast. Watchers expected 3.2 million barrels, but with 5.7 million barrels in inventory imbalances in the market will lead toward a shift in production and price volatility.

The US dollar is down 0.6% against the Canadian dollar, 0.7% against the pound and 0.7% against the Euro.

Key Movers

The news of 191 new COVID-19 cases in Victoria yesterday led to the announcement of a 6-week lockdown in metro Melbourne and a closure of the Victoria-NSW Border by the Victorian government. The local currency, which was approaching the key 0.7000 handle at Asian open, was sold off nearly 60 points on the news to trade closer to 0.6930. As expected, the RBA maintained their monetary policy stance yesterday, holding the cash rate at 0.25% and delivered nothing of impact to markets.

Expected Ranges

USD/CAD: 1.353 – 1.362 ▼

EUR/USD: 1.126 – 1.134 ▼

GBP/USD: 1.251 – 1.26 ▼

USD/AUD: 1.433 – 1.443 ▼


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Aussie falters at key 70c handle as risk sentiment consolidates

OFX Daily Market News

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AUD – Australian Dollar

Tuesday’s offshore sessions saw a consolidation in global risk appetite as equity markets were lower and the safe haven USD was higher. This saw the Australian Dollar trade sideways, ranging between 0.6925 and 0.6878 throughout overnight trade. Given the escalating situation in Victoria, the AUD/NZD cross was forced lower, slipping from 1.0630 to 1.0609, opening up the door for a move below 1.06.

The news of 191 new COVID-19 cases in Victoria yesterday led to the announcement of a 6-week lockdown in metro Melbourne and a closure of the Victoria-NSW Border by the Victorian government. The local currency, which was approaching the key 0.7000 handle at Asian open, was sold off nearly 60 points on the news to trade closer to 0.6930. As expected, the RBA maintained their monetary policy stance yesterday, holding the cash rate at 0.25% and delivered nothing of impact to markets.

As we head into a very quiet day on the data release front, we’re expecting the local unit to continue to trade in line with global risk sentiment. Due to the unfolding situation in Victoria, risks are seemingly skewed to the downside with immediate support at 0.6930 looking vulnerable. On the topside, key resistance at 0.7000 is still a big obstacle.

Key Movers

Taking a global look at the overnight session which seemingly had it all, the USD index was 0.3% higher across the board as risk sentiment consolidated as US-China trade tensions simmered and the strength of the US economic recovery was questioned. News that US Secretary of State, Mike Pompeo was looking at banning Chinese social media app TikTok and concerned comments from Fed official Bostic about what the recent spike in COVID-19 cases meant for the economic recovery stifled risk sentiment globally.

The Euro under-performed, falling from 1.1310 to 1.1260 before recovering slightly. The GBP was the best performer on the day, rising 0.6% against the greenback to trade around 1.12560 ahead of this week’s Brexit negotiations.

Expected Ranges

AUD/USD: 0.6900 – 0.7000 ▼

AUD/EUR: 0.6130 – 0.6180 ▲

GBP/AUD: 1.7890 – 1.8110 ▲

AUD/NZD: 1.0580 – 1.0640 ▼

AUD/CAD: 0.9390 – 0.9480 ▲


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Coronavirus concerns weaken US dollar

OFX Daily Market News

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USD – United States Dollar

The United States dollar weakened across the board overnight as risk assets continued to climb despite the worsening Covid-19 news headlines. The US Dollar Index fell 0.42% yesterday to open this morning at 96.77.

Nevertheless, the broad movement lower for the US dollar was relatively tempered when in comparison to movements in risk asset markets. The S&P500 rose 1.3% following China’s lead but risk aligned currencies didn’t quite claw back as much from the Greenback. Adding further support to the US dollar was a surprisingly positive US ISM Non-Manufacturing PMI which jumped to 57.1 in June from 45.4 the previous month.

Key Movers

Across the pond, the Euro was the best performer for the day, reaching a high of 1.1345 before receding late in the session to open at 1.1308. Following the rally in Asian equities, the Euro also found support from a better-than-expected result in European retail sales with the decline only coming in at -5.1% year on year. The Euro continued to take its direction from risk-aligned assets however and moderated later in the day as the US Dollar regained some ground.

After making a play for 0.70, AUD/USD is lower on the announcement of the lockdown in Melbourne and with little top tier data this week to analyze it seems the spread of the virus will dictate currency moves with USD likely to gain should sentiment remain negative. Indeed, the euro which has shown strength of late has slipped a little this morning with EUR/USD back under 1.13 due to risk aversion. The move lower for the euro was likely given some extra impetus by German Industrial Production figures falling short of expectations this morning showing a 7.8% gain when 11% was the median forecast.

Expected Ranges

USD/CAD: 1.352 – 1.359 ▲

GBP/USD: 1.246 – 1.258 ▼

EUR/USD: 1.126 – 1.133 ▼

USD/AUD: 1.429 – 1.444 ▲


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Aussie continues its upward march to within touching distance of 0.7

OFX Daily Market News

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AUD – Australian Dollar

The Australian Dollar continued its upward trajectory, touching an almost one month high of 0.6988 before moderating to this morning’s open of 0.6974. Initially, the story wasn’t as rosy for the Aussie as it felt the weight of the weekends negative news headlines and softened on open on Monday. Despite starting from a lower base, the Australian Dollar found its feet quickly during the session as Asia came online.

With little on the domestic calendar to drive direction, the Aussie turned off-shore for momentum and found it with Australia’s largest trading partner China. A front-page editorial in the Chinese state media sponsored Securities Times wrote that developing a “healthy” bull market after Covid-19 was extremely important to the economy. This added to the already high-flying Chinese equity markets with the CSI300 Index climbing 5.7% and taking its gains over the last week to 14%. Chinese bond markets also received a boost with 10-year bond rates breaking through 3%, its highest level since January. With Chinese risk assets continuing its bullish run, the Aussie, long considered a proxy for global risk appetites, enjoyed a significant bid up to be in touching distance of 0.7.

Moving into Tuesday, the Aussie now turns to the RBA rate announcement for direction. While widely expected to be a hold at 0.25%, punters will turn to the accompanying statement for hints as to the central banks current thought process.

Key Movers

The United States Dollar weakened across the board overnight as risk assets continued to climb despite the worsening Covid-19 news headlines. The US Dollar Index fell 0.42% yesterday to open this morning at 96.77. Nevertheless, the broad movement lower for the US Dollar was relatively tempered when in comparison to movements in risk asset markets. The S&P500 rose 1.3% following China’s lead but risk aligned currencies didn’t quite claw back as much from the Greenback. Adding further support to the Greenback, was a surprisingly positive US ISM Non-Manufacturing PMI which jumped to 57.1 in June from 45.4 the previous month.

Across the pond, the Euro was our best performer for the day, reaching a high of 1.1345 before receding late in the session to open at 1.1308. Following the rally in Asian equities, the Euro also found support from a better-than-expected result in European retail sales with the decline only coming in at -5.1% year on year. The Euro continued to take its direction from risk-aligned assets however and moderated later in the day as the US Dollar regained some ground.

Expected Ranges

AUD/CAD: 0.9391 – 0.9488 ▲

AUD/EUR: 0.6112 – 0.6201 ▲

GBP/AUD: 1.7817 – 1.7996 ▼

AUD/NZD: 1.0591 – 1.0695 ▼

AUD/USD: 0.6914 – 0.7022 ▲


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Non-manufacturing activity gains in June

OFX Daily Market News

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USD – United States Dollar

US economic activity in the non-manufacturing sector grew in June after two consecutive months of contraction, according to a report from the nation’s purchasing and supply executives.

The Non-Manufacturing ISM Report on Business represents a survey of about 300 purchasing managers to rate the relative level of business conditions. It is considered a leading indicator of economic health.

The US dollar saw a mild bump in value against the Euro, the Great British pound and the Canadian dollar.

Looking at the week ahead, the US releases unemployment claims Thursday. As the US tangles with COVID-19, unemployment claim numbers will give insights into the future of consumer spending.

Key Movers

The UK hospitality sector received a welcome boost this weekend as pubs, restaurants and cinemas reopened after over three months of coronavirus enforced shutdown. Dubbed “Super Saturday,” it came across as a relative success with those fearing hospitals would be overwhelmed with revelers taking it too far. As more and more venues reopen this weekend it will be another test to see how the English public and the sector copes with months of pent up demand.

European Central Bank President Christine Lagarde over the weekend painted a bleak picture for the Eurozone. She listed the likely scenario of two years of downward price pressures as the economy transitions as a result of the pandemic. In the UK, Brexit talks ended prematurely last week as key issues around UK fishing waters and the role of the European court of justice remain sticking points.

Expected Ranges

USD/CAD: 1.352 – 1.356 ▼

GBP/USD: 1.246 – 1.251 ▼

EUR/USD: 1.124 – 1.134 ▲

USD/AUD: 1.431 – 1.442 ▼


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Can the Aussie continue its ascent above 0.70?

OFX Daily Market News

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AUD – Australian Dollar

After a week of solid gains for the Australian Dollar, Friday’s session was a relatively quiet one as the US markets were closed for Independence Day. With little news to drive markets, the Aussie dollar continued its ascent against the greenback, rising from 0.6930 to 0.6947 throughout trade, taking its weekly improvement to 1.2%. Although the AUD/NZD ticked up 20 points on Friday to touch 1.0640, the strong weekly performance by the Kiwi saw a 0.62% weekly decline for the cross, presumably due to the outbreak of new COVID-19 cases in Victoria.

On the macro front, we have domestic inflation data this morning which should continue to show little to no inflationary pressure to worry the RBA. It should also be a similarly gloomy story for the ANZ Job ads read, although the number edged 0.5% higher in May, the outlook for the labor market is still uncertain as businesses plan for a post-covid environment. Looking offshore, we have Eurozone investor confidence and retail sales data for May which are expected to paint a brighter picture than April given some restrictions have been lifted. Finally, we will get US services PMI out of the world’s largest economy to round out the session.

Without a lead in from the US market due to Friday’s holiday, it makes it hard to predict whether the AUD/USD can break through solid resistance at 0.6950. If we do see a breakthrough this handle during trade, it could open the door for bids above the key 70 cent handle. Any deterioration in the unfolding virus situation in Victoria, or in risk sentiment more broadly, could see the pair test initial support at 0.6902 before last weeks low of 0.6830.

Key Movers

As we touched on above, US markets were closed on Friday for Independence Day, rendering the day a quiet one for traders. The worlds reserve currency finished the week softly as the domestic COVID 19 case count continues its ascent, particularly in the southern states. Some commentary from ECB president Christine Lagarde over the weekend painted a bleak picture for the Eurozone as she listed the likely scenario of two years of downward price pressures as the economy transitions as a result of the pandemic. In the UK, Brexit talks ended prematurely last week as key issues around UK fishing waters and the role of the European court of justice remain sticking points.

Despite the 0.2% fall in the USD index on Friday, EUR/USD and USD/JPY both traded sideways throughout trade as volume was low. The EUR/USD traded between 1.1220 and 1.1249 with USD trading in a 10 point range with a high of 1.0755. Although the Brexit uncertainty we touched on above has kept the GBP upside contained, GBP/USD is slightly off Thursdays highs of 1.2529 however a trade deal with the EU could push the pair considerably higher with levels around 1.40 not being ruled out by markets.

Expected Ranges

AUD/USD: 0.6902 – 0.7000 ▲

AUD/EUR: 0.6130 – 0.6190 ▲

GBP/AUD: 1.7860 – 1.8090 ▼

AUD/NZD: 1.0580 – 1.0703 ▼

AUD/CAD: 0.9350 – 0.9430 ▲


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