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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Aussie range bound as currency markets subdued

OFX Daily Market News

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AUD – Australian Dollar

The Australian dollar crept lower through trade on Thursday despite another uptick in equities. A stronger than anticipated US non-farm payroll report followed a slew of better than expected macroeconomic indicators, bolstering hopes a swift economic rebound is still possible. Equities rallied in the wake of the announcement with the S&P500 advancing nearly 1%, however the risk-on mood did not extend to currency markets and the AUD struggled to hold onto intraday highs approaching 0.6950. The correlation between equity gains and the AUD has dissipated this week with the AUD firmly range bound. While investors remain optimistic Central Banks will continue to backstop and prop up financial markets, heightened concerns the uptick in COVID-19 cases throughout the US and now Victoria will derail the economic recovery are weighing on markets, preventing equity gains from spilling into other asset classes.

Attentions remain squarely affixed to coronavirus headlines with the AUD unlikely to break outside recent ranges, trading between 0.68 and 0.70 into the weekly close.

Key Movers

Currency markets remained subdued through trade on Thursday with G10 currencies confined to tightening ranges, as the risk-on rally enjoyed across equity markets failed to spill into other financial asset classes. The US dollar index edged higher as stronger than anticipated US non-farm payroll data bolstered hopes of a swift rebound in economic activity. The US economy added nearly 5 million new jobs in June, well above median estimates and a strong sign that with re-opening comes improvement in labour market indicators. Despite strong gains in hospitality and leisure, the data was not all positive. Unemployment still remains high and over 11%, while the number of workers now unemployed who were previously subject to temporary layoffs increased by nearly 3 million. This shift in employment status from temporary to full time is worrying as it suggests underlying business are struggling to cope with the extended lock down period. With many US states now re-introducing strict social distancing measures in a bid to curtail the rapid spread of the virus, June’s strong performance could simply be nothing more than a false dawn.

Attentions today remain squarely affixed to broader risk trends with coronavirus headlines dominating direction.

Expected Ranges

AUD/USD: 0.6830 – 0.6960 ▼

AUD/EUR: 0.6080 – 0.6210 ▲

GBP/AUD: 1.7880 – 1.8120 ▼

AUD/NZD: 1.0580 – 1.0720 ▼

AUD/CAD: 0.9350 – 0.9430 ▼


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Employment figures strengthen US dollar

OFX Daily Market News

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USD – United States Dollar

US employment figures released this morning increased the strength of the US dollar against its larger trading partners in Canada, Great Britain and Europe.

The dollar climbed higher on positive jobs numbers. Total nonfarm payroll employment rose by 4.87 million in June, and the unemployment rate declined to 11.1 percent, the U.S. Bureau of Labor Statistics reported this morning. Weekly unemployment claims dropped for the thirteenth week in a row.

The job creation and unemployment numbers are important leading indicators of consumer spending and provide overall insight into economic activity. Despite these positive indicators, COVID-19 continues to dominate trends. Most currency pairs with the US dollar remain entrenched within recent ranges.

Key Movers

The British pound ticked higher in the past 24 hours, but with little local data to drive it. Comments from Bank of England’s Jonathan Haskel helped the pound advance. He said that retail sales and spending more broadly appear to be recovering from their April lows, and that expected Q2 as a whole will not be quite as negative.

Risk sentiment was boosted by a COVID-19 vaccine from Pfizer and Germany’s BioNTech, which was found to be well tolerated in early-stage human trials. The 45 people that participated in the trial, which included placebos, saw a V-shaped recovery. Welcome news for the global economy that continues to tackle the virus and get back on its feet. This improved risk appetite has seen investors and traders sell their safe haven currencies and take a cautionary look at riskier assets. This can be seen in AUD and NZD gains against a basket of safe havens, such as the USD, overnight.

Expected Ranges

USD/CAD: 1.356 – 1.362 ▲

GBP/USD: 1.246 – 1.252 ▲

EUR/USD: 1.122 – 1.13 ▲

USD/AUD: 1.440 – 1.448 ▲


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AUD creeps higher on promise of COVID19 Vaccine

OFX Daily Market News

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AUD – Australian Dollar

The Australian dollar advanced through trade on Wednesday, extending moves above 0.69 US cents following a risk on move driven by news Pfizer and BioNtech’s early trial of a COVID19 vaccine has shown promising results. Having traded sideways for much of the domestic session the AUD struggled to mount any real upward momentum as concerns over new security laws in Hong Kong overshadowed a surprise uptick in Chinese manufacturing and services data. An increasing number of arrests in Hong Kong have fostered fears Beijing is pushing to end the One Country, Two systems model, promoting increased tensions within the region and dampening demand for risk. The AUD touched intraday lows at 0.6880 and look set to close the day lower before the last-minute risk on run. A surprise uptick in US manufacturing data helped fuel the risk on run as investors jumped on reports Pfizer and BioNtech could have a 100 million doses of the vaccine ready by the end of the year. Investors and analyst appeared to place greater stock in the vaccine news, choosing to ignore the increasingly worrying and largely unchecked spread across the US as plans to continue the broader economic re-opening are put on hold. Having touched session highs at 0.6937 the AUD crept lower into the close and currently buys 0.6916 US cents.

Attentions remain squarely affixed to Coronavirus headlines with the AUD entrenched within recent ranges. Having failed in its attempt to advance beyond 0.70 US cents the AUD is now bouncing between support at 0.68 and resistance at 0.70 amid the eb and flow of risk demand.

Key Movers

The Great British Pound was again the days top performer, advancing against major counterparts and extending Tuesday’s rally to push above 1.24 and 1.2450. While there were no obvious triggers for Sterling’s sustained uptick, the risk on run created by improved US macroeconomic data and the promise of a COVID19 vaccine before the end of the year have helped drive the currency higher. The Pound was one the worst performing major units throughout June plunging almost 5% and as such appears relatively cheap. There is a sense that the early quarter uptick is merely a correction in last months sell off and investors taking advantage of a reasonable buying opportunity.

Safe havens struggled again as the USD and broader dollar index both fell, while the JPY was forced lower on the back of the late risk on move. Currency ranges have become much more constrained following the volatility of March, April and May with fluctuations amid set ranges governed by the eb and flow of risk demand. With contrasting forces pulling in either direction the question is now which side will win out.

Expected Ranges

AUD/USD: 0.6830 – 0.6980 ▲

AUD/EUR: 0.6050 – 0.6180 ▲

GBP/AUD: 1.7850 – 1.8280 ▲

AUD/NZD: 1.0620 – 1.0720 ▼

AUD/CAD: 0.9320 – 0.9420 ▲


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Positive jobs numbers can’t lift economic outlook

OFX Daily Market News

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USD – United States Dollar

Private sector employment increased by 2,369,000 jobs from May to June according to the June ADP National Employment Report released this morning. While this was below expectations, it was a positive sign that hiring picked up in the month of June.

The data provides an early look at employment growth, and job creation is a leading indicator of consumer spending. The ADP jobs data stood in stark contrast to yesterday’s activity.

The US dollar came under pressure yesterday as coronavirus cases rose by 47,000 showing the US is losing its battle with the pandemic. California, Texas and Arizona have emerged as new US epicenters of the pandemic. Already states have begun to reimpose lockdowns. This, along with continual US-China tensions, and the US dollar being sold at end of quarter flow, overshadowed local data that was starting to paint a prettier picture on recovery.

EUR/USD touched 1.1250 yesterday and GBP/USD topped at 1.2400. Until market focus shifts away from risk and back to the underlying economic fundamentals, we expect a protracted period of choppy trade with firmer support and resistance bands.

Key Movers

UK GDP data did little to help the falling pound yesterday morning with the final q/q figure coming in worse than expected. The early news saw the pound drop to 1.2260 versus the US dollar and 1.0935 against the euro. Prime Minister Boris Johnson announced a plan to fast-track GBP 5 billion of infrastructure investment and slash property planning rules to revive the UK economy. The news was expected and had little impact on the pound as many believe it is too low a figure when taking into consideration the increase in recent government intervention/stimulus to aid the UK recovery from the pandemic.

The Australian dollar trended higher through trade on Tuesday, buoyed by a surge in demand for risk as month end flows dominated direction. Having traded sideways for much of the domestic session the AUD bounced off intraday lows at 0.6838 and pushed back through 0.69 US cents following equities higher. The S&P 500 advanced nearly 1% on the day closing out its best quarterly performance in over 20 years, highlighting just how quickly financial markets have bounced back from the panic that enveloped markets at the beginning of the COVID-19 pandemic. The question now is, can the upturn be sustained? The alarming uptick in new coronavirus infections has certainly curbed the pace of gains enjoyed through April and May, while underlying fundamentals suggest a long and protracted broader economic recovery.

Haven currencies underperformed with the JPY and USD giving up gains as the risk on narrative fueling equity markets filter into currencies.

Expected Ranges

USD/CAD: 1.355 – 1.361 ▼

GBP/USD: 1.236 – 1.246 ▼

EUR/USD: 1.119 – 1.127 ▲

USD/AUD: 1.44 – 1.452 ▲


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Month end rebalancing and risk on mood push AUD back toward 0.69

OFX Daily Market News

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AUD – Australian Dollar

The Australian dollar trended higher through trade on Tuesday, buoyed by a surge in demand for risk as month end flows dominated direction. Having traded sideways for much of the domestic session the AUD bounced off intraday lows at 0.6838 and pushed back through 0.69 US cents following equities higher. The S&P 500 advanced nearly 1% on the day closing out its best quarterly performance in over 20 years, highlighting just how quickly financial markets have bounced back from the panic that enveloped markets at the beginning of the COVID-19 pandemic. The question now is, can the upturn be sustained? The alarming uptick in new coronavirus infections has certainly curbed the pace of gains enjoyed through April and May, while underlying fundamentals suggest a long and protracted broader economic recovery. Victoria’s introduction of localised lockdown measures across key postcodes ensures the threat of the coronavirus will continue to weigh on consumers and the broader economy well into the 2nd half of 2020. As the risk on move that drove the AUD higher through April and May appears more fragile, we anticipate a period of consolidation. Gains above 0.69/0.6950 will likely be hard won as mounting uncertainty caps upside moves. We expect supports at 0.6830/0.68 will hold through the short term, with a definitive risk off shift the primary threat. Having been one of the best performing major currencies through Q2 we expect a much tighter trading range through Q3. Until markets focus shifts away from risk and back to the underlying economic fundamentals, we expect a protracted period of choppy trade with firmer support and resistance bands.

Key Movers

The Great British Pound was the days top performer on Tuesday, advancing three quarters of a percent after Boris Johnson promised an injection of 5billion pounds into new infrastructure projects in a bid to drive domestic growth and employment. The GBP jumped back through 1.23 and 1.2350 before resistance on moves at 1.2390/1.24 stoppered further gains. Despite the late upturn the Pound was among the worst performers in June as the UK continued its struggle to contain the coronavirus, while hard Brexit fears again loom large with the final divorce date at the end of the year approaching rapidly.

Haven currencies underperformed with the JPY and USD giving up gains as the risk on narrative fuelling equity markets filter into currencies.

Attentions today turn to preliminary US employment data and a host of European and Asian manufacturing data sets. While fundamental still take a back seat to risk, improved manufacturing conditions may over some hope a broader economic rebound is still on track.

Expected Ranges

AUD/USD: 0.6830 – 0.6950 ▲

AUD/EUR: 0.6020 – 0.6180 ▲

GBP/AUD: 1.7820 – 1.8050 ▲

AUD/NZD: 1.0650 – 1.0720 ▼

AUD/CAD: 0.9280 -0.9420 ▼


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Powell, Mnuchin in spotlight at Congressional committee

OFX Daily Market News

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USD – United States Dollar

Federal Reserve Chairman Jerome Powell sits down today with Treasury Secretary Steven Mnuchin before the House of Representatives Financial Services Committee.

Followers can expect much of the same rhetoric. The path forward in uncertain. Full recovery is unlikely until people feel safe. The Fed is committed to using its full range of tools. According to The Economist, America has gone all out. The fiscal stimulus is worth 15% of GDP and the Fed’s balance-sheet has swollen by trillions of dollars of asset purchases.

The stimulus has made a positive impact. The Conference Board Consumer Confidence Index increased to 98.1 in June, up from 85.9 May.

The US dollar has reversed recent gains on the positive news this morning with its dropping against the Canadian dollar, Great British pound and the euro.

Key Movers

Haven currencies were the days big losers as the JPY and CHF both retreated amid an equity led risk on move. While price action across currency markets was largely muted throughout trade on Monday the rebound in the S&P 500 did prompt a small risk on correction forcing the Yen and Franc near half a percent lower as the promise of sustained Federal Reserve support continues to prop up equity markets.

The Great British pound fell through trade on Monday as concerns regarding Brexit and Britain’s ability to fund planned fiscal infrastructure programs forced the below 1.23 to intraday lows at 1.2252.

Attentions today remain squarely affixed to the evolving fight against COVID-19 as risk continues to drive direction and underlying fundamentals are largely ignored.

Expected Ranges

USD/CAD: 1.36 – 1.369 ▼

GBP/USD: 1.226 – 1.238 ▼

EUR/USD: 1.119 – 1.126 ▼

USD/AUD: 1.447 – 1.462 ▼


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