The Greenback falls as we await the release of the Fed minutes and following Powell and Mnuchin’s presentation yesterday.

OFX Daily Market News

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USD – United States Dollar

The Greenback is falling versus all the majors, -0.5 vs the Euro, -0.2 vs the Loonie, and -0.9 vs the Aussie dollar. The most important piece of information, the FOMC meeting minutes, will be released at 2:00 pm EST and they may confirm the catalysts for a weaker US dollar in the short-term. Tomorrow, initial jobless claims will be released, but filings for jobless benefits in the May employment survey week will likely continue to trend down as most states gradually reopen their economies. Bloomberg Economics’ preliminary forecast for May assumes a decline in nonfarm payrolls of 7 million and a surge in the unemployment rate to 20 percent.

Fed of Atlanta President Raphael Bostic said he’s not clear how fast the U.S. economy will rebound from the current contraction and the pace of recovery will be dictated by the health-care response. After Bostic’s speech, Fed President James Bullard said that the virus policy response has been “sized” about right, adding that if the shutdown goes on too long, risks to banks will rise. He also said he expects the Fed rate to stay near zero for a quite a while. These comments have caused the US dollar to erase some of its losses over the last few minutes.

Yesterday, Fed Powell wasn’t as upbeat about unlimited fiscal stimulus. Powell and Treasury Secretary Steven Mnuchin were under fire in the Committee of Banking. Powell had been vocal about the need for additional fiscal stimulus if warranted, but he stopped short of asking Congress for any specific measures. Treasury Secretary Mnuchin warned that a prolonged business shutdown would pose long-term threats to the economy.

Key Movers

Australian MoM retail sales figures showed a fall overnight. The previous figure was at +8.5 percent, but the actual number for April was a fall of -17.9 percent. In spite of this, the AUD/USD pair has touched a new high since March 9th.

The CPI in Canada came in at -0.2 percent versus the -0.1 percent expected, which is setting the Canadian economy into deflationary territory. However, fundamentals stopped being followed a long time ago, maybe because Covid-19 is creating a challenge for Statistics Canada to collect and measure data in an environment of low response rates. Anyway, the driver of volatility *in currencies* appears to be the same thing that caused stocks to rise just 24 hours ago and then fall overnight: Moderna. This morning though, the market was cheering again over the possibility of the vaccine on the horizon, so the Loonie has been in a rally mode versus the Greenback.

Overall, commodity prices were supporting the Loonie’s strength. For example, crude oil with delivery in July went up 2.2 percent, rising the most since March 16th, and it is in a rally mode for a fifth day as investors weigh signs that the market is rebalancing against what’s still a precarious economic outlook. The Loonie however is mixed against its Group-of-10 peers. It is outperforming havens (Yen), while lagging high beta peers such as the Aussie dollar and Kiwi dollar. Canadian crude that normally travels to the U.S. is finding a market in China, where demand is almost back to pre-virus levels. The last piece of economic data came from wholesale trade sales month to month, which came in at -2.2 percent versus the -4.8 percent expected.

Expected Ranges

USD/CAD: 1.3867 – 1.3939 ▼

EUR/USD: 1.0944 – 1.1000 ▲

GBP/USD: 1.2168 – 1.2318 ▲

AUD/USD: 0.6500 – 0.6616 ▼

NZD/USD: 0.6068 – 0.6150 ▼


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Spillover in risk sentiment helps AUD hold on above 0.65

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AUD – Australian Dollar

The Australian dollar held onto gains won through Monday testing a break above resistance at 0.6570 as optimism surrounding a possible coronavirus vaccine and the ongoing opening up of the global economy fuelled investors appetite for risk. A spillover from Monday’s surge in equities and risk assets ensured the distinct risk on mood would continue through trade on Tuesday helping the AUD drive through 0.6550 and touch intraday highs at 0.6582.

The AUD still remains vulnerable to broader shifts in risk demand with investors hesitant to extend beyond the current resistance handle. With uncertainty clouding forward guidance the AUD remains vulnerable to ongoing volatility especially as diplomatic tensions with China increase. A Bloomberg report showed China was considering targeting more Australian exports including wine, seafood, fruit and dairy, adding to the 80% tariff imposed on barley and restrictions placed on meat from some of Australia’s largest abattoirs. While the market reaction to the report was largely muted and a full-scale trade war is unlikely the targeting of Australian exports will likely weigh on topside moves should tensions escalate through the medium term.

Attentions today remain affixed to risk flows ahead of commentary from RBA governor Lowe Thursday. Expect the AUD to maintain support and resistance handles between 0.6380 and 0.6570.

Key Movers

Haven assets were the days big losers with the USD, JPY and CHF all correcting lower when compared with other major counterparts. Monday’s risk on shift spilled into Tuesday as optimism surrounding a possible coronavirus vaccine and ever-increasing economic activity amid easing restrictions continued to fuel demand emerging market currencies and those majors tied to risk.

The Sterling bounce continued pushing back above 1.2250 to touch intraday highs at 1.2300. An uncertain coronavirus outlook and a looming hard Brexit will ensure the Great British Pound remains under pressure through the short and medium term with topside moves above 1.23 and approaching 1.25 hard won. Instead, fair value for now sit between 1.20 and 1.23.

The Euro advance continued through Tuesday marking a 1% gain to start the week. Optimism surrounding the Franco-German led EU rescue package, helped bolster demand for the single currency as hopes the fund will prop up those economies worst hit by the virus without creating long-term debt obligations. The proposal is set to be delivered to the EU commission on May 27 and is the first step toward joint debt obligations. The Euro surged to 1.0975 before shifting lower into this morning’s open.

The Norwegian Kroner was the day’s top performer, buoyed by strong gains in oil prices. Oil has enjoyed a sustained recovery after May futures fell below zero just two weeks ago. With economic activity increasing and restrictions easing demand is picking up, easing oversupply issues and driving prices higher.

Expected Ranges

AUD/USD: 0.6380 – 0.6580 ▲

AUD/EUR: 0.5930 – 0.6030 ▲

GBP/AUD: 1.8580 – 1.8980 ▼

AUD/NZD: 1.0680 – 1.0830 ▼

AUD/CAD: 0.9020 – 0.9150 ▲


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The US dollar weakens after Powell’s remarks to the Senate Banking Committee.

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USD – United States Dollar

Fed Chair Jerome Powell said the Fed is ready to do what it takes to help the U.S. economy counter the fallout from the coronavirus, so the dollar weakened against most Group-of-10 currency peers for a second day and commodity-linked currencies rose with crude oil. The Greenback touched session lows in early NY trading and remained low as Powell spoke. Powell added, “…we are committed to using our full range of tools to support the economy in this challenging time even as we recognize that these actions are only a part of a broader public-sector response.”

Treasury Secretary Steven Mnuchin also said he plans to use all of the $500 billion that Congress provided to help the economy through direct lending from his agency and by backstopping lending programs at the Fed.

Powell still doesn’t like negative interest rates and he is assuming there will not be a second wave of the coronavirus. He believes that the economy will recover through the second half of this year. Early today, Powell took a step back from the more forceful language he used in recent weeks urging Congress to consider more fiscal support for the economy. The US dollar loses -0.4 percent versus the Loonie, -0.53 versus the Aussie dollar, and -0.13 versus the Euro.

Key Movers

The reality of the latest risk-on mood and movement in G10 currencies over the last few hours stems from developments towards a coronavirus vaccination by a biotech company called Modena. A small number of healthy patients were given the first doses of Moderna’s coronavirus vaccine and it appeared to have generated antibody responses to the virus, according to early phase one trial data released by the company on Monday.

The British Pound had already started to tick higher after the UK announced plans for 30 billion pounds in tariff cuts after Brexit. The new-post Brexit tariff regime is set to replace the European Union’s external tariff. The GBP/USD pair is trading a bit higher at 1.2244 at the time of this writing, despite the perception that the U.K. will join the negative-rates club by the end of December 2020.

Meanwhile, Italian debt is at risk of being unmanageable and the ECB Governing Council and EU leaders have to decide if they are willing to allow a much larger transfer of Italy’s liabilities to their balance sheets. The borrowing costs continue to rise in Italy. For now, the EUR/USD pair is trading higher due to the US dollar’s weakness.

Expected Ranges

USD/CAD: 1.3850 – 1.3900 ▼

EUR/USD: 1.0927 – 1.0980 ▲

GBP/USD: 1.2226 – 1.2318 ▲

AUD/USD: 0.6502 – 0.6572 ▲

NZD/USD: 0.6066 – 0.6156 ▲


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Promise of a vaccine spurs risk on move, driving the AUD back through 0.65

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AUD – Australian Dollar

The Australian dollar rallied on Monday rising steadily throughout the day, extending beyond 0.65 to touch intraday highs at 0.6527. Souring risk sentiment forced the AUD lower through trade last week as fears of a second wave of infections enveloped markets. That sentiment shifted on Monday as increased mobility across developed economies fostered hopes of a swift rebound in economic activity, while suggestions early trials of a vaccine by US pharma company Moderna were promising, and reports France and Germany have finally agreed an acceptable framework for a COVID19 bailout agreement helped bolster risk demand and drive equities and commodity currencies higher.

The AUD remains vulnerable to broader swings in risk demand as sentiment continues to shift amidst the ever changing, economic, geopolitical and global health outlook. Having found support on moves below 0.6380 the AUD appears to be forming a new short-term range between 0.6350 and 0.6550/70. While we expect volatility within said ranges to continue a break outside these handles will require a broader shift in the underlying risk tone. Longer term forecasts remain promising as Australia’s outstanding response to the coronavirus outbreak ensures the economy is well placed to open up more broadly than major counterparts, however as risk continues to dominate direction topside gains will remain hard won as the US dollar holds onto haven demand amidst the uncertainty.

Attentions today turn to the RBA’s monetary policy meeting minutes, while commentary from Fed Chair Jerome Powell and a G7 meeting dominate the offshore docket.

Key Movers

The Euro jumped through trade on Monday as the US, dollar Japanese Yen and Swiss Franc struggled to mount any upward momentum in the face of broadly positive risk on move. The combined unit pushed through 1.09 advancing eight tenths of a percent to touch intraday highs at 1.0926 after France and Germany announced a framework for a 500billion Euro bailout/recovery fund. Importantly the fund will allow the EU commission to borrow money direct from the market and issue grants, not loans, to those member states that desperately need support. While the agreement still requires the backing of all 27 member countries and resistance is expected from Austria, the Netherlands, Denmark and Sweden it is at least a step in the right direction, creating the foundations for a wider European agreement on joint debt.

The Japanese yen was the weakest of majors through trade on Monday as risk demand drove investors away from haven assets, while GDP data showed the Japanese economy shrank through Q1 with expectations Q2 will see an even bigger contraction as Coronavirus amplifies uncertainties.

The Great British Pound bounced of 8-week lows as broad based USD weakness and the risk on mood helps shift the focus away from stalled Brexit negotiations and suggestions the Bank of England may employ negative interest rates in a bid to bolster economic activity. Climbing off 1.2075 Sterling touched intraday highs at 1.2226 before edging lower into this morning open.

Expected Ranges

AUD/USD: 0.6380 – 0.6570 ▲

AUD/EUR: 0.5930 – .6050 ▲

GBP/AUD: 1.8680 – 1.9120 ▼

AUD/NZD: 1.0720 – 1.0850 ▼

AUD/CAD: 0.9020 – 0.9150 ▲


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Aussie extends losses to test 0.64 level

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AUD – Australian Dollar

The Australian Dollar extended its reversal from last week’s high of 0.6560 to test one-week lows of 0.64 on Friday, ultimately opening this morning at 0.6415. Falling 0.72% for the day, the Aussie found itself under renewed selling pressure as risk sentiment soured on the back of reports of growing tensions between the worlds’ two largest economies and increasing concerns of a second wave of infections.

Friday was a relatively quiet day on the domestic economic calendar with little to digest at home. Nevertheless, COVID-19 headlines continued to dominate currency markets with the Aussie in particular susceptible to shifts in risk sentiments. Initially, reports of increased cases in countries that have relaxed lockdown restrictions undermined Aussie support but this was soon exacerbated by reports of the growing tensions between the US and China. The US Commerce Department announced on Friday that it was tightening restrictions on foreign companies supplying Huawei with semi-conductors. China responded rapidly, announcing that they were prepared to add companies such as Apple and Qualcomm to their ‘unreliable entity list’ subjecting them to new restrictions. Australia, added fuel to the fire as well by suggesting an inquiry into the Coronavirus pandemic might be a prudent course of action. China, unimpressed with the request, has taken a hard-line approach with Australia, banning beef imports from four Australian facilities as well as threatening 80% tariffs on barley. Geo-political stoushes aside, economic data also continued to be of concern on Friday with US retail sales slumping by 16.4% and US Industrial Production falling to 36.1. Overall, with COVID-19 far from over, growing geo-political concerns and shaky domestic data, risk sentiment took an about turn last week which saw the Aussie succumb to four consecutive days of declines.

Moving into a new week, the Aussie continues to take cues from COVID-19 and trade tension headlines.

Key Movers

The Great British Pound found itself in the ranks of the worst performing major currencies on Friday after it saw a precipitous 1.01% decline. The fresh, 7-week low comes on the back of Brexit bursting back onto the scene and dismal US data. Opening this morning at 1.2099, the Sterling came under pressure after reports that Brexit negotiations between the EU and the UK have again reached a stalemate. With the transition period approaching expiration on the 31st of December, and the on-going concerns with the COVID-19 pandemic, the Great British Pound found itself wantonly sold off on Friday.

Across the pond, the United States Dollar consolidated gains on Friday which saw the US Dollar Index appreciate by 0.1%. Aided by the shift to risk aversion across global financial markets, the US Dollar, considered a safe haven currency, saw gains almost across the board. This comes despite a poor retail sales report, Industrial Production reading and fresh concerns over a deteriorating COVID-19 situation.

Expected Ranges

AUD/CAD: 0.8995 – 0.9102 ▲

AUD/EUR: 0.5878 – 0.5983 ▲

GBP/AUD: 1.8725 – 1.8914 ▼

AUD/NZD: 1.0761 – 1.0859 ▲

AUD/USD: 0.6352 – 0.6461 ▼


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The Greenback pauses its rally amid sluggish retail economic data.

OFX Daily Market News

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USD – United States Dollar

The US dollars trades flat this morning after the strong rally experienced over the last few days. The lack of strength today is due to retail sales data, which plunged by a record of 16.4 percent in April versus the 12.3 percent drop expected. Additionally, US job openings fell 813 K to 6.19 M in March, down from 7.00 M the prior month. Finally, the New York Fed’s Empire Manufacturing Survey showed activity continued to deteriorate in May, as non-essential activity remained on pause.

On a more positive note, the University of Michigan’s consumer sentiment index came in at 73.7 in May, which is up from 71.8 in April. It seems like the CARES relief checks improved consumers’ finances and price discounting boosted their buying attitudes.

Jobless claims are just under 3m vs the estimate of 2.5m. Although very high, this represents the 6th consecutive decrease in the number. The total since mid-March has risen to 36.5 million, which equates to around ¼ of workers now being on benefits.

For years, Trump had been an advocate of a weaker dollar to gain an economic advantage for US exporters. However, he now appears to have changed his tune, saying it would be a “great time” to have a strong dollar. Well, the US dollar continues to strengthen even when US economic data disappoints.

The Fed bought $305 million of ETFs on the first day of its intervention into corporate debt markets, which increases the divergence between bad economic data and the strong equity market. In the meantime, the US dollar is appearing to be in a win win situation, where it increases with bad or good economic data and acts as a safe haven. Later today, the Fed will release its 2020 Financial Stability Report.

Key Movers

BoE Governor Andrew Bailey reiterated that negative interest rates are not something the BoE is contemplating at the moment, although he didn’t rule them out definitively.

The disagreement continues between the U.K. and the EU over which provisions on financial services can be included in the future trade agreement treaty. The Pound has fallen 0.85 percent versus the US dollar and 0.61 percent versus the Canadian dollar this morning.

Germany plunged into recession, with first-quarter GDP tumbling 2.2 percent, the most in more than a decade. The euro-area economy as a whole shrank 3.8 percent and employment fell 0.2 percent, the first decline since 2013. In Asia, the slide in Chinese retail sales moderated in April to 7.5 percent year over year, but still missed expectations for a 6 percent drop.

In Mexico, the central bank cut interest rates by 50 basis points to 5.50 percent and there was a unanimous rate cut decision, but despite the deteriorating economic growth outlook and evidence of abating inflationary pressure, Mexico’s central bank is favouring caution. The Mexican central bank mentioned that the global economic growth outlook has kept deteriorating and risks are still biased to the downside.

Expected Ranges

USD/CAD: 1.4050 – 1.4167 ▲

EUR/USD: 1.0767 – 1.0850 ▼

GBP/USD: 1.2060 – 1.2169 ▼

AUD/USD: 0.6369 – 0.6469 ▼

NZD/USD: 0.5911 – 0.5973 ▼


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Unemployment data offers sobering insight into future hardships

OFX Daily Market News

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AUD – Australian Dollar

The Australian dollar struggled through trade on Thursday marking fresh weekly lows at 0.6402 in the wake of sobering employment data. The unemployment rate jumped to 6.2% in April as some 600,000 Australians lost their jobs as a direct result of COVID-19 lockdowns. At face value the numbers appear largely on or ahead of expectations with conservative estimates suggesting the unemployment rate would rise to 8.3%, but a deeper analysis pointed to some worrying signs that may hamper prospects for a quick rebound in economic activity. A sharp drop in the participation rate was all that saved the unemployment rate from jumping higher. Only 63.5% of the eligible working community were actively employed or looking for work, a 3% drop on March and the lowest read in 16 years. If the participation rate had remained in line with last month then unemployment would have shot above 9%. Furthermore, if we group the unemployed and underemployed together then almost 20% of the workforce are either out of work or unable to work as much as they would like. Worryingly the data released yesterday doesn’t offer a complete assessment of the true economic impact as it only reports on the first two weeks of April opening the door for greater labour market uncertainty and more job losses. With unemployment tipped to reach 10% in June, hopes of a swift bounce back in economic activity led by consumer spending are fading.

Having touched lows at 0.6402 the AUD clawed its way back above 0.6450 throughout overnight trade. The dollar has marked a series of lower lows and lower highs this week in an environment not- necessarily plagued by the same risk drivers as previous weeks, a sign the AUD upturn through April may be fading. As attentions remain squarely affixed to the evolution of reduced lockdown measures and the size and impact of any second wave of infections we are watching key supports at 0.6380 and 0.62 as markers and possible signals for broader moves.

Key Movers

The US dollar advanced against a basket of currencies through trade on Thursday with the DXY index pushing through 100.50 and marking a fresh 3 week high. Investors largely overlooked alarmingly high jobless claims pushing the worlds base currency higher on hopes of a bounce back in economic activity as parts of the country open up. Fears of a second wave of infections have capped gains but investors appear optimistic the recent slew of devastating macroeconomic indicators will improve once Americans go back to work. The yen and the Swiss franc offered little, suggesting the move wasn’t one driven by risk-off moves and perhaps leaves the upturn vulnerable to a correction, as investor focus inevitably turns to broader economic performance. Over 36 million Americans have filed for unemployment benefits since lockdown measures began in March as the weekly jobless claims report becomes an all-important measure of broader economic health. With sections of the economy re-opening in the weeks ahead analysts will be keenly attuned to future data points for any sign of improvement across employment numbers. There is a growing fear that temporary job losses may become permanent if the economy fails to respond quickly and markets will be looking for signals jobs are being reinstated quickly if the dollar is to maintain long run values.

The Great British pound fell to 5-week lows, slipping below 1.22 after data showed the economy contracted by a record 5.8% in March. The combination of coronavirus and Brexit woes are weighing on the pound with investors reluctant to extend long term GBP positions. The UK surpassed Italy as this week with the most COVID-19 casualties in Europe and appears some way off from meaningfully reducing social distancing restrictions. With Brexit risks still looming and broader economic pain expected, the GBP will struggle on moves above 1.23 through the short term.

Expected Ranges

AUD/USD: 0.6380 – 0.6530 ▼

AUD/EUR: 0.5920 – 0.6050 ▲

GBP/AUD: 1.8820 – 1.9180 ▼

AUD/NZD: 1.0680 – 1.0820 ▼

AUD/CAD: 0.9020 0.9130 ▼


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The Greenback trades slightly higher amid a risk-off market mode and following Trump’s “positive” comments about Powell.

OFX Daily Market News

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USD – United States Dollar

The Greenback trades flat this morning amid a weaker U.S. equity market. It is trading lower against the Loonie, but higher against the Aussie, Pound, and Euro. After the House of Representatives released a proposed $3 trillion relief bill on Tuesday, Fed chair Jerome Powell urged Congress to do more against the economic impacts of the Covid-19 pandemic. The problem is that the pandemic-fueled recession is morphing from having a short-term impact to a potential long-term recession, where economists, including Fed officials, are urging policymakers to adjust government spending accordingly. In a speech yesterday, Powell talked about the risk of long-term economic pain and said that the Fed has been aggressive and remains willing to do more, but that fiscal policy is important as well. He also added, “The recovery may take some time to gather momentum and time can turn liquidity problems into solvency problems.”

St. Louis Fed President James Bullard said fiscal support has been, “…right-sized for the situation” based on market forecasts. He added that, “…a financial crisis could develop if the shutdown policy goes on for too long,” or worse, there could be a, “…depression scenario where you have so many business failures and you get a lower output for a long time”. Bullard also said the Fed is paying close attention to the mortgage market; the Fed is not considering negative interest rates despite persistent market speculation.

Finally, Trump had some “positive” comments about Powell (Fed chair): “He has done a very good job over the last couple of months, I have to tell you that … Because I have been critical, but in many ways I call him my MIP.” Trump then explained that MIP means Most Improved Player. The USD dollar is trading 0.3 higher than the Euro at the time of this writing.

Key Movers

Rishi Sunak advised that the UK was heading for a “significant recession,” as figures show the economy contracting at the fastest pace since the financial crisis. The economy contracted 2 percent in Q1 and is affected by 2 weeks of shut down. As a comparison, France and Italy saw much bigger contractions of 5.8 percent and 4.7 percent respectively in the first quarter, where lockdowns were imposed up to two weeks earlier.

The Loonie is rallying versus most G10 currencies (+0.42 versus the Pound, +0.29 percent versus the Euro, and +0.1 versus the Greenback). The Canadian economy is not out of trouble yet, due to the Covid-19 pandemic situation. Poloz and Wilkins from the BoC, using the traditional purpose of the FSR to identify key vulnerabilities in the financial system, said that emergency measures to deal with the economic impacts of Covid-19 are showing promising signs of performing well, but the Canadian economy is facing an uncertain future.

The USD/CAD is trading at 1.4085, following a 4 percent increase in crude oil after Saudi Arabia announced that it will trim oil shipments to the prized Asian market in June and cut exports even more aggressively to Europe and the U.S. The IEA sees the oil market improving amid the sharp drop in production.

Expected Ranges

USD/CAD: 1.4050 – 1.4167 ▼

EUR/USD: 1.0765 – 1.0826 ▼

GBP/USD: 1.2110 – 1.2212 ▼

AUD/USD: 0.6374 – 0.6449 ▼

NZD/USD: 0.5911 – 0.5975 ▼


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AUD vulnerable as risk sentiment sours

OFX Daily Market News

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AUD – Australian Dollar

The Australian Dollar opens lower this morning, falling overnight as the US dollar recoups early week losses. Having touched intraday highs at 0.6522 the AUD fell back through 0.65 following commentary from Federal Reserve Chairman Jerome Powell, wherein he rejected the prospect of negative interest rates. Powell struck a dovish and downbeat tone when assessing the economic outlook suggesting the US economy was only at the beginning of an extended period of weak growth. Despite the gloomy outlook investors unwound bets for negative interest rates, propping up the USD and forcing the AUD toward intraday lows at 0.6437.

Risk continues to drive direction and with concerns of longer lockdowns amid a 2nd wave of infections weighing on markets, moves beyond 0.6530/0.6550 remain hard won through the short term. With the virus continuing to cloud long term forecasting the AUD remains vulnerable to ongoing shifts in the broader risk narrative. Concerns countries like the US may be relaxing social distancing restrictions too early are building prompting many investors to begin pricing in an extended economic downturn giving up hopes of a swift rebound in growth prospects.

Attentions today turn to domestic unemployment and labour market numbers. With almost 600,000 jobs expected to have been lost from the economy and the unemployment rate tipped to reach 8.3%, todays print offers an invaluable insight into the scale of damage caused by the coronavirus through the peak of social distancing measures.

Key Movers

The US dollar advanced through trade on Wednesday buoyed by Federal Reserve Chair Jerome Powell’s staunch rejection of negative interest rates and a broader risk off push. Equities fell as traders confidence of a swift economic recovery faltered following commentary for Powell and Leading infectious disease spokesman Dr Anthony Fauci. Powell proffered a gloomy economic outlook suggesting an extended period of economic weakness lay ahead as COVID19 continues to restrict/limit any return to normalcy, while Fauci issued a stark reminder of the risks in opening up to early, suggesting mortality rates could sky rocket and the burden on public health and finances would likely mean a longer period of economic activity than that suffered by remaining in lockdown through the short term. The dire outlook forced investors to dump risk assets, driving the dollar high amid haven flows. The AUD, CAD, NZD and GBP all fell pushing the DXY index back above 100 to touch intraday highs at 100.26.

Attentions remain squarely affixed to risk, with demand driven by evolving expectations for economic recovery. Despite having seemingly controlled the initial outbreak it is increasingly apparent a quick-fire economic recovery is becoming less and less likely prompting investors to reassess the recent risk driven recovery and perhaps opening the door to another risk off move to haven assets.

Expected Ranges

AUD/USD: 0.6320 – 0.6530 ▼

AUD/EUR: 0.5910 – 0.6050 ▼

GBP/AUD: 1.8720 – 2.0020 ▼

AUD/NZD: 1.0620 – 1.0820 ▲

AUD/CAD: 0.8980 – 0.9150 ▼


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The U.S. dollar rallies following Powell’s remarks about closing the door to negative rates, going against Trump’s expectations.

OFX Daily Market News

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USD – United States Dollar

Fed Powell said this morning that fiscal policy might need to do more to combat the lasting economic damage from the coronavirus pandemic and he slammed the door on Trump’s desire for negative rates. Powell added, “…the evidence on the effectiveness of negative rates is very mixed …It’s an unsettled area…I know that there are fans of the policy, but for now it’s not something that we’re considering. We think we have a good toolkit, and that’s the one we’ll be using.” President Donald Trump tweeted on Tuesday that, “…as long as other countries are receiving the benefits of Negative Rates, the USA should also accept the ‘GIFT’”.

Fed Chair Jerome Powell, IMF Chief Economist Gita Gopinath, and others have been saying that a quick recovery for the U.S. economy is a fantasy.

Key Movers

Crude oil is trading close to a five-week high as investors weighed the late recovery of demand against concerns about more covid-19 cases if lockdowns are relaxed too early. Furthermore, Iraq is leading cuts in oil supply to the Asian market, which is also increasing prices for China that has recently increased demand.

There are no economic releases in Canada, but it is helpful to remember that the Canadian economy is in the midst of a unique contraction with an employment decline of over 3 million. Bloomberg Economics projects 2Q GDP will plunge about 48 percent annualized, following an annualized decline of 9.2 percent in 1Q. It also expects a sharp rebound in 3Q, with unemployment remaining above 10 percent until the end of the this year.

The Kiwi dollar weakened versus all major G10 peers as the FX market has begun to price in negative policy rates after the RBNZ almost doubled its quantitative easing program. The RBNZ signaled further interest rate cuts.

Expected Ranges

USD/CAD: 1.4050 – 1.4167 ▲

EUR/USD: 1.0767 – 1.0863 ▼

GBP/USD: 1.2166 – 1.2280 ▼

AUD/USD: 0.6412 – 0.6495 ▼

NZD/USD: 0.5973 – 0.6012 ▼


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