Australian Dollar falters as US stimulus delays dampen demand for risk

OFX Daily Market News

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AUD – Australian Dollar

The Australian dollar opens lower this morning having drifted off intraday highs at 0.7190 overnight amid heightened concerns US lawmakers will not be able to reach an agreement on COVID-19 relief measures while tensions with China remain frosty. Negotiations between democrats and republicans stalled last week and reports suggest little progress has been made through the week thus far. While most investors expect Congress will reach some form of compromise in the coming days/week there is mounting concern the stalemate could fester. The risk of protracted negotiations is significant as it delays critical unemployment benefits and income support measures currently propping up consumption. A long-term freeze on support will essentially bring consumption to grinding halt. The uncertainty meant demand for risk has soured Tuesday forcing the AUD back below 0.7150 to intraday lows at 0.7135.

Despite the risk off move the AUD remains supported by broadly positive sentiment yet struggles to advance beyond resistance at 0.7230/0.7240. While there is scope for added AUD upside a period of consolidation while US fiscal stimulus talks continue will likely see ranges narrow over coming days and the USD supported by safe haven demands.

Attentions today turn to US CPI data and the RBNZ monetary policy meeting. After the emergence of 4 new community transmitted cases in NZ have forced the country into partial lockdown a proactive increase to its monthly bond buying program could push the AUD through resistance at 1.9 against the NZD.

Key Movers

The US dollar crept higher Tuesday amid a souring demand for risk. Discussions surrounding the next phase of COVID-19 relief remain at loggerheads with democrats and Republicans at an impasse, unable to progress negotiations, weighed down by partisan agenda’s. With critical income support platforms now at risk for an extended period there is a sense of nervousness creeping into markets. Failure to restore unemployment benefits will leave a huge whole in consumption and could force the US even deeper into recession. The Dollar index pushed back through 93, hitting a one-week-high. Safe haven demand should continue to prop up the dollar as long as negotiations continue.

The Euro slipped back below 1.1750, drifting off intraday highs at 1.18 amid a broader USD uptick. The single currency enjoyed early momentum following a ZEW survey of economic sentiment showed a significant improvement in German optimism. With Europe’s engine room gaining in confidence there is hope the EU will enjoy a swift recovery as we move through the latter half of 2020 and into 2021, ensuring the Euro remains well bid through the medium term.

The Great British Pound retraced early gains and again failed to hold onto an extension beyond 1.31 as a US dollar uptick and dour labour market report dampened demand for the resurgent pound. Data showed job losses reached their highest level in more than 10 years throughout the 2nd quarter, a stark reminder just how much damage was done in the early days of the Pandemic. While medium term gains against the USD remain in play we expect domestic economic woes and Brexit concerns will weigh on GBP value when compared with other major counterparts.

Expected Ranges

AUD/USD: 0.7080 – 0.7240 ▼

AUD/EUR: 0.6020 – 0.6130 ▼

GBP/AUD: 1.7980 – 1.8420 ▲

AUD/NZD: 1.0780 – 1.0920 ▲

AUD/CAD: 0.9450 – 0.9620 ▼


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Australian Dollar range bound amid ongoing US fiscal stimulus negotiations

OFX Daily Market News

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AUD – Australian Dollar

Markets remained subdued through trade on Monday, offering little to excite investors in what was a largely uneventful start to the week. In the absence of headline data points the AUD bounced between 0.7140 and 0.7185. The AUD struggle to find any meaningful direction as investors appeared reluctant to push the commodity led unit back above 0.72, instead adding support to the USD following Friday’s better than expected non-farm payroll data and Saturday’s Presidential executive order reinstating some unemployment benefits. The small level of stimulus helped bolster demand for the worlds base currency but fell well short of the relief needed to help guide the economy through this unprecedented crisis. With little of note on the docket this week we expect moves across currency markets will remain muted with swings in risk demand driving direction.

Attentions remain affixed to US lawmakers for any signs a plan for COVID-19 Stimulus can be reached. With markets rewarding aggressive and committed government and monetary support programs a Democrat style package could undermine recent AUD upside through the short term. Acknowledging these short-term risks, we still expect broad based US dollar weakness through the latter half of the year as the push toward fundamentals and the uncertain US backdrop force investors toward other asset corridors.

Key Movers

The US dollar crept higher through trade on Monday, buoyed by Friday’s better than expected Non-farm payroll print and the introduction of new stimulus measures. While talks between democrats and republicans broke down and a full scale fiscal relief package could was not brokered, President Trump, signed an executive order to reinstate unemployment benefits, a stop gap measure until talks resume. The breakdown in negotiations leaves the door open to longer term economic consequences but with talks resuming the market appears confident a deal will be brokered in the short term. If a compromise cannot be reached this week the Dollar may come under sustained downward pressure as markets reward those with aggressive COVID-19 relief plans.

The Euro edged lower amid the US upturn, slipping back below 1.18. Having enjoyed a sharp reversal in fortunes throughout June/July the single currency appears poised to push toward and beyond 1.20 before the end of the year. While expect a consolidation across currency markets through the coming week/weeks the long-term outlook remains intact with positive risk sentiment driving direction.

The Pound crept higher up 0.3% against the dollar but still short of last weeks 5 month high at 1.3185. There remains scope for further GBP upside as improvements in underlying data sets help underpin the recovery off June lows. That said, investors appear reluctant in extending the squeeze on shorts beyond 1.32 at present with some resistance forming. Amid a slew on uncertainty we expect Sterling will enjoy ongoing volatility as Brexit concerns and a sluggish recovery battle broad based US weakness and a shift in underlying market drivers/fundamentals.

Expected Ranges

AUD/USD: 0.7080 – 0.7240 ▼

AUD/EUR: 0.6020 – 0.6130 ▲

GBP/AUD: 1.7980 – 1.8420 ▲

AUD/NZD: 1.0780 – 1.0920 ▲

AUD/CAD: 0.9480 – 0.9620 ▼


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No clarity on US fiscal package

OFX Daily Market News

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USD – United States Dollar

The dollar was mixed in the first days of trading since US legislators failed to agree on a stimulus package and President Donald Trump signed executive orders attempting reboot the economy.

The US Dollar Index is up .05% since yesterday’s close and is down a tenth of percent against the uero and the pound. USD/CAD is down .25%.

The number of job openings increased to 5.9 million on the last business day of June, the U.S. Bureau of Labor Statistics reported today. In context, US non-farm payrolls, released last Friday, came in higher than expected. The US economy added 1.8 million jobs. EUR/USD fell on Friday after the data release.

Risk-off flows tend to benefit the lower-yielding euro, especially while the US dollar is under downside pressure. However, there is still a lot of market focus on fears of a second wave of COVID-19 as another round of lockdown measures could prompt a flight to safety.

Key Movers

UK jobs data could spark a reversal in the pound’s recent gains should the unemployment rate in June exceed a forecast of 4.2%. The pound may come under significant pressure should the unemployment data come out worse than expected. Further concerns lie ahead when the British government’s £33.8 billion furlough scheme comes to an end in October.

The Royal Bank of Australia said that it expects GBP to fall 3% in 2020 followed by a likely 6% rise in 2021. Lockdowns in the country could fuel a longer economic recovery and push unemployment into next year with an unknown timeline of when a COVID-19 vaccine will be available. It is unlikely the RBA will change its current stance on the cash rate keeping it at record lows of 0.25%.

The Canadian dollar climbed upward against the euro, pound and US dollar in overnight trading after the price of oil reached $42 a barrel. Saudi Aramco’s Chief Executive Amin Nasser said on Sunday that he expects demand to increase in Asia as covid lockdowns ease. The Canadian dollar climbed with the price of the barrel of oil. USD/CAD was up nearly a quarter percent and EUR/CAD was up .42% this morning.

Expected Ranges

USD/CAD: 1.333 – 1.339 ▼

EUR/USD: 1.174 – 1.179 ▲

GBP/USD: 1.302 – 1.309 ▼

AUD/USD: 0.714 – 0.718


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Roller-coaster ride for the Australian Dollar opening one cent lower

OFX Daily Market News

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AUD – Australian Dollar

The Australian dollar spent most of Fridays local session above 72c when valued against the US dollar aided by positive AiG Services Index which climbed to 44.00 in July compared to 31.5 in June. Having rallied more than 1.5 cents earlier on in the week and touching a 16-month high of 0.7243 on Friday morning, the pair witnessed a sell-off as Gold posted its biggest daily decline in two months and the release of US Non-Farm Payrolls beat expectations causing the Aussie to relinquish much of the gains made last week, touching an eventual low of 0.7145.

Locally, we also saw the release of the RBA’s monthly Monetary Policy Statement where it said the RBA expects GDP to fall 3% in 2020 followed by a likely 6% rise in 2021. However, citing lock-downs in the country could fuel a longer economic recovery and push unemployment into next year with an unknown timeline of when a COVID-19 vaccine will be available. It is unlikely the RBA will change its current stance on the cash rate keeping it at record lows of 0.25%

On the data front, there are no scheduled releases today. Tuesday we have NAB Business Confidence for July and Wednesday’s Westpac’s Consumer Confidence Index, both will be watched by investors to understand the currency view on sentiment under the COVID-19 crisis. Thursday the all-important labour force report for July is issued. The unemployment rate is expected to rise to 7.9% from 7.4% due to a higher workforce participation rate despite an expected 50,000 jobs being created. Finally, on Friday The RBA Governor appears before the House of Representatives’ Standing Committee. From a technical perspective the AUD/USD opens this morning at 0.7155, we can expect to see initial support at 0.7080 and 0.7060 on the downside. Resistance sits at 0.7270.

Key Movers

The U.S Dollar Index closed the week around two-year lows despite jobs created in the U.S beat expectations. Non-Farm payrolls rose by 1,763 million beating forecasts of 1.60 million, although the report shows that more jobs were created, the U.S needs much stronger figures to turn things around. Meanwhile on Saturday, Trump singed four executives on COVID-19 relief, which included $400 in weekly enhanced unemployment assistance; student debt repayment relief; a payroll tax holiday; and an exploration of protections from housing evictions.

The EUR/USD settled into the 1.1780 price zone holding onto modest gains in the week and the GBP/USD cross-rate shed its weekly gains to settle around 1.3060 mark. There is some good news to report on, the UK is working on plans to reopen schools in September after their summer holidays and according to latest reports the number of people being treated for COVID-19 in UK hospitals has dropped by 95% from the peak of the outbreak.

Expected Ranges

AUD/USD: 0.7080 – 0.7250 ▼

AUD/EUR: 0.6020 – 0.6120 ▼

GBP/AUD: 1.8020 – 1.8420 ▲

AUD/NZD: 1.0730 – 1.0900 ▲

AUD/CAD: 0.9500 – 0.9660 ▼


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Jobs report drives gains

OFX Daily Market News

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USD – United States Dollar

The US dollar strengthened in value against most major currencies this morning after a positive jobs report was released.

Since yesterday, the dollar gained over half a percent against the euro, nearly three-quarters of a percent against the pound and 0.65% against the Canadian dollar.
According to the US Bureau of Labor Statistics, Non-Farm Payrolls increased by 1.8 million in July and the unemployment rate fell to 10.2 percent. Both points beat forecasted expectations, which is good for the local currency.

The positive jobs report sends mixed messages to US congressional leaders. Today marked the deadline to agree on a fiscal stimulus package. After the European Union passed package two weeks ago, the strength of the euro increased. Many expect the dollar to rebound from its doldrums with a US fiscal package.

Key Movers

Yesterday the Bank of England kept rates unchanged at 0.1 percent and its asset purchase program at £745 billion. Looking at these two figures surely this is dovish news for the pound, however diving down deeper into the Bank of England statement they are in fact more optimistic about the UK economy than many other forecasters and indeed their own projections from May. According to the central bank the UK is expected to shrink by 9.5% this year before bouncing back 9% next year. All in all, this improved outlook put the wind in the sails for the pound although it didn’t quite break those March 2020 highs.

Expected Ranges

USD/CAD: 1.327 – 1.339 ▲

GBP/USD: 1.301 – 1.316 ▲

EUR/USD: 1.175 – 1.189 ▲


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Australian dollar extends move beyond 0.72 and tests resistance at 0.7240

OFX Daily Market News

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AUD – Australian Dollar

The Australian dollar outperformed most counterparts through trade on Thursday as commodity currencies led majors higher, amid ongoing US dollar softness and broader positive risk sentiment. Investors largely ignored a slew of disappointing earnings reports in Europe and instead drove equities and risk assets higher as the tech sector outperformed and drove the S&P 500 higher. The AUD consolidated a break above 0.72, testing 18-month highs at 0.7240.

Short-term direction continues to be driven by sentiment and expectations surrounding US fiscal stimulus talks. House speaker Nancy Pelosi said negotiations were progressing, but significant difference meant a breakthrough remained elusive. If lawmakers cannot reach an agreement by the end of the week, talks will likely be abandoned until concessions are made. If a deal cannot be reached, President Trump has committed to signing an executive order to ensure basic stimulus measures are made available and unemployment benefits resume. It seems at least some form of government relief will be available by next week, opening the door to volatility moving into the close and Monday’s open. We are watching resistance at 0.7230/40 with supports on moves below 0.713/0.71 intact for now.

Key Movers

The US dollar edged marginally lower on Thursday despite improved labour market data. Jobless claims fell sharply, printing below 1.2million down from 1.435million, the largest weekly decline in almost 2 months. The improved read eases concerns the labour market recovery was beginning to stall amid increasing COVID-19 cases and new social distancing restrictions. As the pace of coronavirus spread begins to slow, there is hope the recovery will enjoy a kickstart, but with numbers still 5-6 times larger than pre-pandemic levels, any sustained USD recovery will be heavily reliant on Government relief plans.

The Great British pound rallied toward 1.32 on Thursday after the Bank of England proffered a neutral tone and was perhaps less pessimistic toward the ongoing economic outlook than investors anticipated. Monetary Policy Committee members voted unanimously to keep rates on hold at 0.1% and maintain the current pace of QE purchases. While markets expected the board would refrain from wholesale adjustments, many had priced in a push toward negative interests’ rates. BoE Governor Bailey acknowledged that a shift to negative rates were in their toolbox but “we don’t plan to use them at this moment”. The affirmation the bank will avoid negative rates coupled with a downward adjustment in unemployment forecasts and the GBP extended its push above 1.31, testing 1.3180 and closing in on a break back above 1.32.

Attentions into the weekend remain affixed to the ebb and flow of risk sentiment, while US stimulus talks dominate short-term direction.

Expected Ranges

AUD/USD: 0.7130 – 0.7290 ▲

AUD/EUR: 0.6020 – 0.6130 ▲

GBP/AUD: 1.7980 – 1.8420 ▼

AUD/NZD: 1.0750 – 1.0880 ▼

AUD/CAD: 0.9520 – 0.9680 ▲


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Without stimulus, US dollar stays down

OFX Daily Market News

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USD – United States Dollar

The US dollar tumbled against a basket of major currencies amidst fears that the US economy will underperform against other major economies. With US lawmakers at loggerheads for a new COVID-19 relief package, concerns have mounted for continued economic pressure across the US.

Attentions remain affixed to US lawmakers and ongoing fiscal stimulus updates as the primary driver of short-term direction.

The dollar index fell back below 93 and stopped short of a break below 92.50, nearing last week’s two year low. The euro and pound both advanced through trade on Wednesday, largely on the back of US dollar weakness. The single currency moved back above 1.1850 to test a break above 1.19 while the pound jumped through 1.31 to touch intraday highs at 1.3160.

Key Movers

The Australian dollar continued to test new highs through trade on Wednesday, pushing back through 0.72 amid hopes a COVID-19 vaccine will be available sooner than first estimated. Having struggled to break above 0.7180 through the domestic session the Australian dollar found support overnight, surging to intraday highs at 0.7251 before profit taking overwhelmed the upturn and the currency corrected lower into this morning’s open. Risk demand was boosted by reports Novavax stage one trials had induced a positive antibody response, while new treatment methods in the US have seen a reduction in mortality rates by up to 50%. Hopes for a cure and a strong round of corporate earnings results, coupled with expectations US lawmakers will reach an agreement on Fiscal Stimulus by the end of the week helped fuel the risk on mood and underpinned the Australian dollar upturn.

The Bank of England released its interest rate decision this morning. The bank expects UK GDP to return to Q4 2019 levels by the end of 2021 with household spending leading the way before business spending catches up. The pound is currently riding a wave of US dollar weakness.

Expected Ranges

USD/CAD: 1.325 – 1.332 ▲

GBP/USD: 1.311 – 1.318 ▼

EUR/USD: 1.182 – 1.190 ▼

USD/AUD: 1.383 – 1.393 ▼


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AUD tests 0.7250 amid ongoing USD under performance

OFX Daily Market News

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AUD – Australian Dollar

The AUD continued to test new highs through trade on Wednesday, pushing back through 0.72 amid hopes a COVID-19 vaccine will be available sooner than first estimated. Having struggled to break above 0.7180 through the domestic session the AUD found support overnight, surging to intraday highs at 0.7251 before profit taking overwhelmed the upturn and the currency corrected lower into this morning’s open. Risk demand was boosted by reports Novavax stage one trials had induced a positive antibody response, while new treatment methods in the US have seen a reduction in mortality rates by up to 50%. Hopes for a cure and a strong round of corporate earnings results, coupled with expectations US lawmakers will reach an agreement on Fiscal Stimulus by the end of the week helped fuel the risk on mood and underpinned the AUD upturn.

Attentions remain affixed to swings in risk sentiment with US fiscal policy the biggest item on the agenda through the latter half of this week. The AUD remains impervious to increasing domestic border restrictions and the continued uptick in new cases in Victoria. Markets have priced in the downturn that will inevitably result from Melbourne and Victoria second lock down and are instead looking for a robust rebound in growth through 2021.

Having struggled to sustain moves above 0.7230 we are seeking a sustained break above this handle as a marker for further upside.

Key Movers

The USD was the days big loser, tumbling against a basket of major counterparts amid a sustained risk on mood and expectations of US under performance when valued against other major economies. The dollar index fell back below 93 and stopped short of a break below 92.50, nearing last week’s two year low. Fears US lawmakers will be unable to reach a deal for COVID-19 relief by the end of the week are mounting as partisan differences delay talks. Democrats and Republicans are at loggerheads when it comes to agreeing the size, scale and direction of stimulus support and have earmarked Friday as a deadline for reaching a deal. If a compromise cannot be found talks will likely be abandoned for now, posing a real risk of deepening economic pressure across the US.

The Euro and GBP both advanced through trade on Wednesday, largely on the back of USD weakness. The single currency moved back above 1.1850 to test a break above 1.19 while Sterling jumped through 1.31 to touch intraday highs at 1.3160. Attentions remain affixed to US lawmakers and ongoing fiscal stimulus updates as the primary driver of short-term direction.

Expected Ranges

AUD/USD: 0.7130 – 0.7250 ▲

AUD/EUR: 0.6010 – 0.6120 ▼

GBP/AUD: 1.7980- 1.8320 ▼

AUD/NZD: 1.0720 – 1.0880 ▲

AUD/CAD: 0.9480 – 0.9620 ▲


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As equities climb, the dollar drops

OFX Daily Market News

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USD – United States Dollar

As the equity markets go, so goes the dollar. But rather than riding the covid-coaster in tandem, the two indices go in opposite directions. In trading this morning, the US dollar rode lows with the euro, pound and Canadian dollar while the S&P 500 climbed higher.

The reasons contradict themselves. More economic pain in the future and easier monetary policy across the US’s major trading partners. The result – traders and investors will take greater risks to capitalize on the new funding from governments.

Having suffered its worst monthly decline in a decade, the dollar’s short-term prospects now rest in the hands of fiscal support plans.

Government relief is crucial in seeing the US through the COVID-19 pandemic. With unemployment benefits ending last week, Congress’s inability to deliver a new round of support risks an even steeper economic downturn as consumer sentiment and spending essentially evaporates.

Currency markets remain tied to risk and fiscal spending at present. If Congress can agree to an extensive and wide-reaching relief program, expect the USD to find support and reverse July’s losses.

Key Movers

The Great British pound edged lower, dipping below 1.30. Fear of second wave of infections derailed the recovery, dampened demand and prompted a shift away from near five-month highs. Despite registering its largest monthly rally in more than 10 years, there are headwinds ahead for the GBP. Brexit negotiations remain at loggerheads as the December deadline looms larger, while the threat of COVID-19 is far from over. It is unlikely the economy will be operating at 100% until well into 2021. We expect resistance on moves approaching 1.33/1.35 with US weakness the key to any sustained upturn.

The Australian dollar edged higher through trade on Tuesday, pushing back through 0.7150 in what was an otherwise lackluster day across both currency and equity markets was. Having crept upward throughout the domestic session following a stronger than anticipated trade surplus and a relatively rosy RBA outlook. The Reserve bank offered few surprises, maintaining its current interest rate setting and only marginally adjusting bond purchases, while re-iterating their view, the economy was performing better than initially expected. While they did point to a sharp decline in GDP through 2020 the promise of a quick recovery through 2021 helped underpin the AUD. The extended and tightened lockdown in Victoria does however pose a significant threat to future growth prospect as the impact to key business across the local economy worsens. Some estimates suggest north of 100,000 business will not survive the new round of lockdown with a rush on insolvencies after job keeper and fiscal support measures ease.

Expected Ranges

USD/CAD: 1.323 – 1.336 ▼

GBP/USD: 1.304 – 1.315 ▼

EUR/USD: 1.176 – 1.190 ▼

USD/AUD: 1.381 – 1.399 ▼


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AUD edges higher in what was an otherwise lacklustre trading day

OFX Daily Market News

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AUD – Australian Dollar

The Australian dollar edged higher through trade on Tuesday, pushing back through 0.7150 in what was an otherwise lacklustre day across both currency and equity markets was. Having crept upward throughout the domestic session following a stronger than anticipated trade surplus and a relatively rosy RBA outlook. The Reserve bank offered few surprises, maintaining its current interest rate setting and only marginally adjusting bond purchases, while re-iterating their view, the economy was performing better than initially expected. While they did point to a sharp decline in GDP through 2020 the promise of a quick recovery through 2021 helped underpin the AUD. The extended and tightened lockdown in Victoria does however pose a significant threat to future growth prospect as the impact to key business across the local economy worsens. Some estimates suggest north of 100,000 business will not survive the new round of lockdown with a rush on insolvencies after job keeper and fiscal support measures ease.

Despite the dour domestic outlook the AUD remains well bid as positive sentiment and a softening USD underpin the shift above 0.70 cents. While the 2nd wave poses a threat to our domestic recovery, our outlook comparable to other major counterparts remains rosy. Attentions today remain affixed to the promise of US fiscal stimulus and fluctuations in risk demand.

Key Movers

The US dollar fell through trade on Tuesday, giving up hard fought gains through Friday and Monday as talks between Republicans and Democrats on the next round of COVID-19 stimulus appear stymied by partisan differences. Having suffered its worst monthly decline in a decade, the dollars short term prospects now rest in the hands of Fiscal support plans. Government relief is crucial in seeing the US through the COVID-19 pandemic and with unemployment benefits ending last week, failure to deliver a new round of support immediately risks an even steeper economic downturn as consumer sentiment and spending essentially evaporates. Currency markets remain ties to risk and fiscal spending at present. If Congress can agree an extensive and wide reaching relief program we would expect the USD to find support and reverse July’s losses, however a republican led program, targeting the bare minimum will likely chasten investors and underpin the recent downturn.

The Great British Pound edged lower, dipping below 1.30 as fears a 2nd wave of infections will derail the recovery dampened demand and prompted a shift away from near 5-month highs. Despite registering its largest monthly rally in more than 10 years there are significant headwinds ahead for the GBP. Brexit negotiations remain at loggerheads as the December deadline looms larger, while the threat of COVID-19 is far from over and it is unlikely the economy will be operating at 100% until well into 2021. WE expect resistance on moves approaching 1.33/1.35 with US weakness the key to any sustained upturn.

Expected Ranges

AUD/USD: 0.7080 – 0.7220 ▲

AUD/EUR: 0.5980 – 0.6120 ▲

GBP/AUD: 1.7980 – 1.8420 ▼

AUD/NZD: 1.0710 – 1.0880 ▲

AUD/CAD: 0.9480 – 0.9620 ▲


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