COVID-19 spread weighing on hopes for swift recovery

OFX Daily Market News

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AUD – Australian Dollar

The Australian dollar crept marginally higher through choppy trade on Thursday as investor attentions remain squarely affixed to the largely unchecked spread of COVID-19 throughout the US, Latin America and South Africa. Having touched intraday lows at 0.6851 the AUD edged upward to mark session highs at 0.6890, but struggled to break outside the 40 point range despite a number of short run upward rallies. Markets appeared reluctant to extend gains across commodity currencies and risk assets, leaving equities, the AUD, NZD and CAD mostly flat on the day.

The re-emergence and rapid spread of new Coronavirus cases across the US has spooked investors, dampening expectations for a swift rebound in economic activity. With the US recovery interrupted, investors are coming to terms with the realities of the current environment and a long/protracted rebuild. The risk on/risk off battle of the past fortnight is starting to tip toward a broader risk-off move with haven assets finding increased support. Equities lost 1.5% through early trade before regulatory change in the US meant a freeing of capital for US banks, prompting a jump in financial stocks that propped up the S&P 500.

As sentiment plays an increasingly important roll in short-term direction our focus remains with broader equity performance as a marker of investors’ appetite for risk. A deeper risk-off move will likely put pressure on short-term supports at 0.6830/40 and could see the AUD retreat back toward 0.67 and possibly 0.66.

Key Movers

The US dollar crept higher through trade on Thursday when measured against a basket of major counterparts, up two tenths of a percent and closing in on four week highs as concerns surrounding a coronavirus resurgence pushes investors toward haven assets. The rapid spread of new infections across a swathe of US states, with Texas and North Carolina forced to suspend plans to re-open their economies and instead impose new measures to try and control their respective outbreaks, has prompted investors to begin re-assessing expectations for a prompt rebound in economic activity. Even if other State and Federal officials continue with the wider economic opening, activity through the short-term is likely to be muted and the recovery process slowed. This fact is beginning to weigh on investors and we are seeing the beginnings of a shift in broader sentiment. A sustained risk-off shift will likely see the USD find renewed short-term demand as markets unwind risk plays.

The GBP is lower this morning after the UK’s Chief Brexit negotiator refused to agree to a compromise on tariffs. While the focus remains largely with the battle against the coronavirus, there is still a long way to go before the UK leaves the EU at the end of the year and further delays/setbacks in divorce negotiations are adding further downward pressure on the GBP. Having slipped below 1.24, the GBP appears well supported on moves approaching 1.2350 for now, but a sell off in risk could prompt a move back toward 1.22 and 1.20.

Expected Ranges

AUD/USD: 0.6830 – 0.6960 ▲

AUD/EUR: 0.6030 – 0.6180 ▲

GBP/AUD: 1.7920 – 1.8180 ▼

AUD/NZD: 1.0650 – 1.0720 ▲

AUD/CAD: 0.9350 – 0.9420 ▲


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Second wave fears tilt market motivation

OFX Daily Market News

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USD – United States Dollar

Traders sought stability in haven currencies yesterday and the US dollar strengthened against other currencies.

Risk sentiment soured after several negative economic reports were released through the day. An alarming rise in coronavirus infection rates around the world, with the US recording its second largest increase in new infections since the pandemic began prompted calls for a return to strict social distancing controls. Investors appear to be finally coming to grips with the fact that the second wave of infections will likely derail the economic rebound as a longer path to recovery lies ahead.

The International Monetary Fund’s most recent review of economic activity, the organization changed its expectations. It expects global output will shrink almost 5%, up from its 3% estimate in April, as advanced economies like the US suffer unprecedented declines in GDP output.

Key Movers

The Australian dollar, having failed in its bid to push above 0.70 US cents now appears somewhat range bound, bouncing between 0.6830 and 0.6960, with more broader supports in play on moves approaching 0.6780 and 0.67. Demand for risk continues to be the primary force governing direction and as markets grapple with an ever-shifting risk on risk off mood, volatility within recent ranges has increased. Investors have become increasingly sensitive to headline news as the risk on move that sustained the AUD upturn through April and May runs out of steam and markets are not yet willing to shift focus to underlying fundamental indicators. With COVID-19 infection rates soaring around the world hopes of a prompt rebound in economic activity are beginning to wane capping AUD upside through the short term and opening the door to a longer period of consolidation and increasing downward pressure.

Expected Ranges

USD/CAD: 1.359 – 1.367 ▲

EUR/USD: 1.119 – 1.128 ▲

GBP/USD: 1.239 – 1.245 ▲

USD/AUD: 1.451 – 1.459 ▲


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AUD under pressure as risk demand falters amid rising COVID19 infection rates

OFX Daily Market News

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AUD – Australian Dollar

A slew of dour headlines prompted a shift in risk sentiment on Wednesday, driving equities lower and dragging commodity and growth led currencies downward. The Australian dollar slipped back below 0.69 US cents amid increasing market nervousness, as a surge in COVID 19 cases prompts calls for renewed social distancing measures, while US and EU trade tensions and a correction in the IMF economic outlook added further weight to the risk off move, forcing the AUD toward intraday lows at 0.6865.

The Australian dollar, having failed in its bid to push above 0.70 US cents now appears somewhat range bound, bouncing between 0.6830 and 0.6960, with more broader supports in play on moves approaching 0.6780 and 0.67. Demand for risk continues to be the primary force governing direction and as markets grapple with an ever-shifting risk on risk off mood, volatility within recent ranges has increased. Investors have become increasingly sensitive to headline news as the risk on move that sustained the AUD upturn through April and May runs out of steam and markets are not yet willing to shift focus to underlying fundamental indicators. With Covid19 infection rates soaring around the world hopes of a prompt rebound in economic activity are beginning to wane capping AUD upside through the short term and opening the door to a longer period of consolidation and increasing downward pressure.

Attentions today turn again to US unemployment claims as the headline item on the macroeconomic docket, while Coronavirus headlines and trade tensions direct risk sentiment.

Key Movers

The US dollar was the big winner Wednesday, as risk sentiment soured and investors sought safety in haven assets. An alarming rise in coronavirus infection rates around the world, with the US recording its second largest increase in new infections since the pandemic began prompted calls for a return to strict social distancing controls. Investors appear to be finally coming to grips with the fact that the second wave of infections will likely derail the economic rebound as a longer path to recovery lies ahead. A fact evidenced by the IMF most recent review of economic activity. The IMF now expects global output will shrink almost 5%, up from its 3% estimate in April, as advanced economies like the US suffer unprecedented declines in GDP output.

The Euro Fell through 1.13 and 1.1250, touching intraday lows at 1.1245 after the office of US trade published a note, announcing new tariffs will be imposed on over $3 billion of European imports, with some tariffs as high as 100%. The note comes as the World Trade Organization rules on EU issued tariff on US goods and serves as a reminder of US-EU trade tensions.

The Canadian dollar fell sharply as oil prices plunged amid concerns increasing coronavirus infections will force renewed lockdown measures and re-ignite supply issues that plagued oil markets in April.

Attentions today remain affixed to risk demand as investor sentiment is perhaps finally shifting back toward a more conservative playbook.

Expected Ranges

AUD/USD: 0.6780 – 0.6960 ▼

AUD/EUR: 0.6030 – 0.6150 ▼

GBP/AUD: 1.7950 – 1.8150 ▲

AUD/NZD: 1.0620 – 1.0750 ▲

AUD/CAD: 0.9320 – 0.9420 ▼


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Commodity shipments reach 7-month high

OFX Daily Market News

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USD – United States Dollar

A unique index tracking rates for ships ferrying dry bulk commodities reached its highest point since November, and it quadrupled since May.

The Baltic Dry index tracks and reflects rates for ships transporting iron ore, coal, grains and many other commodities. It tracks 23 shipping routes and the cost to move goods through those routes. It’s an important bellwether for the global economy and reflects the shifting demand of economies as they open back up.

The Baltic Dry index dropped below 400 points in mid-May at the height of the global lockdown. Yesterday, the Baltic Dry index surpassed 1000 for the first time since December.

Positive flash PMI’s out of the Eurozone aided a jump in the Euro, with EUR/USD breaking above 1.1310 to touch an intraday high of 1.1348, its highest level since June 16.

Key Movers

Although yesterday’s sessions finished with a positive risk, yesterday was a wild ride for risk assets. Investors shed risk assets during Asian trade when headlines surfaced that White House trade advisor Peter Navarro, informed news outlets that President Donald Trump had made the decision to terminate the China trade deal. This saw risky currencies like the AUD and NZD sold off aggressively and US equity futures much lower. Having since back tracked from his comments and after a raft of better than expected flash PMI’s out of Europe, risk assets recovered to finish the day in positive territory.

Expected Ranges

USD/CAD: 1.351 – 1.360 ▲

GBP/USD: 1.242 – 1.253 ▲

EUR/USD: 1.126 – 1.132 ▼

USD/AUD: 1.436 – 1.456 ▲


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AUD consolidates above 0.6900 ahead of quiet session

OFX Daily Market News

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AUD – Australian Dollar

The Aussie Dollar rose for the second consecutive day as global risk sentiment was boosted by stronger than expected flash PMI’s out of Europe and positive signals from the US government on both the stimulus and US-China trade front. This saw the defensive US Dollar index fall 0.4% on the day, with the AUD/USD rising from 0.6900 to 0.6974 before partially retracing back to 0.6935. It was a similar story for the Kiwi, meaning the AUD/NZD cross traded in a sideways range between 1.0670 and 1.0690.

On the macro front, the global docket is headlined by the Reserve Bank of New Zealand’s cash rate decision today before Chinese current account balance data for Q1. Overnight we will also get second tier data out of Germany and the US in the form of business sentiment surveys and house price indexes.

Our AUD/USD levels to watch for the session ahead are largely unchanged from yesterday however given the sustained move above the 0.6900 handle, a move through initial resistance at 0.7000 is looking more likely. A move through this would see next level resistance at 0.7075. On the downside, initial resistance is still seen at 0.6890 before 0.6840.

Key Movers

Although we eventually finished the session with positive risk sentiment, Tuesday was a wild ride for risk assets. Investors shed risk assets during Asian trade when headlines surfaced that white house trade advisor Navarro informed news outlets that Trump had made the decision to terminate the China trade deal. This saw risky currencies like the AUD and NZD sold off aggressively and US equity futures much lower. Having since back tracked from his comments and after a raft of better than expected flash PMI’s out of Europe, risk assets recovered to finish the day in positive territory.

Global equities were up over 1% on the day with the defensive USD index down 0.4%, representing its second consecutive day of falls. Interestingly, despite the risk on backdrop, the JPY outperformed on the day with USD/JPY falling 0.4% to 106.50.

The positive flash PMI’s out of the Eurozone aided the Euro’s ascent, with EUR/USD breaking above 1.1310 to touch an intraday high of 1.1348, its highest level since June 16. The positive European story also saw the GBP/USD break through the 1.25 handle, reaching 1.2530 during trade before retreating slightly. Lastly, taking a look at the Canadian dollar, USD/CAD saw some fresh selling pressure forcing the pair below the key 1.3500 psychological level.

For the day ahead, traders will be closely watching the RBNZ cash rate decision which we touched on above. Data out of China, the Eurozone and the US are also expected to be of interest before some FED speak on the US economy will round out the session.

Expected Ranges

AUD/USD: 0.6810 – 0.7000 ▲

AUD/EUR: 0.6103 – 0.6155 ▲

GBP/AUD: 1.7917 – 1.8130 ▼

AUD/NZD: 1.0630 – 1.0700 ▼

AUD/CAD: 0.9305 – 0.9420 ▲


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Home buyers weren’t held back by COVID

OFX Daily Market News

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USD – United States Dollar

New home sales exceeded expectations according to data released by the U.S. Census Bureau and the Department of Housing and Urban Development.

Single-family houses in May 2020 increased by 12.7% compared to May 2019. Its an 16.6% increase above April’s revised 580,000 home sales. In May, the seasonally adjusted rate was 676,000. However, the positive sentiment was not received well. Over the last 24 hours, the US dollar was down 0.72% against the Euro and 0.68% against the Pound.

In upcoming releases, Japan, Germany, America and the Eurozone release PMIs.

Key Movers

The Australian and Kiwi dollars benefited from broad based USD weakness overnight. After hitting highs just above 0.6935, AUD/USD fell to lows under 0.6860 while NZD/USD hit lows of 0.6437. As with GBP and the EUR, both the antipodean currencies regained much of their loses and start today’s trading pretty much unchanged.

For the most part, the Pound regained much of its early loses through Monday trading, moving from a low of 1.2335 back above the 1.24 handle. Overnight Asia trading seemed to be shaping up to continue the same path, however, during an interview with Fox News, Assistant to the President Peter Navarro said that the US-China trade agreement was over.

Expected Ranges

USD/CAD: 1.349 – 1.356 ▲

GBP/USD: 1.243 – 1.253 ▼

EUR/USD: 1.123 – 1.134 ▼

USD/AUD: 1.434 – 1.455 ▼


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Aussie snaps losing streak as wall street posts modest gains

OFX Daily Market News

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AUD – Australian Dollar

The Australian dollar benefited from broad based USD weakness overnight, with the US dollar index falling 0.6%, the AUD was able to rise over 60 pips from 0.6860 to 0.6920. The tight correlation between the AUD and global equity markets was once again evident as the S&P500 rose 0.7% on the day, whilst the NASDAQ100 also rose 1.2%, posting a record close in the process. AUD/NZD initially fell to 1.0630 as the Kiwi performed strongly however it did recover back to levels nearer to 1.0664.

On the domestic docket today, we have second tier data in the form of preliminary merchandise trade data for the month of May. Market participants don’t take much notice of the release as the data is not seasonally adjusted; it is therefore not expected to move markets. On the global front, we have a raft of PMI’s out of Japan, Germany, America and the Eurozone as well as industrial production numbers out of Taiwan. Further contractions are universally predicted across these releases.

Having bounced off lows of 0.6811 on Monday to now trade above 0.6900, traders will want to see a consolidation above this handle before moves to 0.7000 will be considered. On the downside, initial support is now seen at previous resistance level 0.6890 with a break below this opening up moves to 0.6840 (21 day moving average).

Key Movers

As we touched on above, we witnessed a reversal in risk sentiment throughout Monday trade which saw the USD sold off and risk assets such as equities and risky currencies rally. The reversal in risk sentiment also extended to commodity markets as oil, copper and gold all posted strong gains. These moves were seen as a sign of confidence from investors that the global recovery has begun and demand for these commodities will rebound.

Consistent with the shift in risk sentiment, the safe haven Japanese Yen underperformed, particularly in the crosses however the USD weakness saw USD/JPY trade sideways around the 107 handle. EUR/USD posted strong gains to trade around 1.1250 whilst a similar story was seen for GBP/USD, which closed the session near its daily high of 1.2460.

Global markets will now turn to the raft of PMI releases due out today which we outlined above. To finish out the week, investors will be looking to the RBNZ’s monetary policy decision on Wednesday before US GDP and employment figures on Thursday for direction.

Expected Ranges

AUD/USD: 0.6810 – 0.7000 ▲

AUD/EUR: 0.6095 – 0.6150 ▲

GBP/AUD: 1.7950 – 1.8120 ▼

AUD/NZD: 1.0630 – 1.0700 ▼

AUD/CAD: 0.9280 – 0.9360 ▲


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Second wave concerns drive market rates

OFX Daily Market News

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USD – United States Dollar

Markets continued to trade on global risk sentiment and currency markets were spurred on by fears of a second wave of COVID-19 infections.

The US Dollar Index (US DXY) extended its winning streak into a fourth day, appreciating 0.25% to take it to its highest point since early June. Opening this morning at 97.66 the US dollar, a safe-haven currency, benefited from global risk sentiment souring in the face of a potential second wave of COVID-19 infections. Markets swiftly lost their appetite for risk assets and commodity linked currencies such as the Australian and Canadian dollars.

In related news, existing home sales reports will be released on Monday followed by New Home Sales on Tuesday. Durable Goods Orders will be released on Thursday.

Key Movers

The Great British Pound hit a fresh three-week low to open this morning at 1.2348. Falling around 0.59% on Friday, the Sterling continues to remain under pressure after the Bank of England announced its intent to increase its bond-buying program by £100 billion. The result comes despite a better than expected Retail Sales reading and reports that Brexit negotiations are not nearly as bad as once thought. Nevertheless, a resurgent US Dollar, coupled with further monetary policy easing was too much for the Pound to overcome.

The Australian Dollar enjoyed a day of two halves, first capitalizing on risk-on flows early on Friday before reversing course during the American session. Ultimately, the Aussie rose to a daily high of 0.6912 before falling about 0.12% for the day to close at 0.6835. Opening this morning at 0.6818, the Aussie opens slightly lower on a weekly basis.

Expected Ranges

USD/CAD: 1.354 – 1.362 ▲

GBP/USD: 1.233 – 1.245 ▲

EUR/USD: 1.116 – 1.126 ▼

USD/AUD: 1.447 – 1.467 ▼


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The US dollar increases, despite a pessimistic outlook by the Fed of Boston President Eric Rosengren

OFX Daily Market News

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USD – United States Dollar

It is a very light day for economic data in the US. However, Fed of Boston President Eric Rosengren expects a weak economic rebound from coronavirus related shutdowns and said more than 200 lenders had begun registration for the Main Street Lending Program. He also sees unemployment remaining above 10% in the second half of this year, with inflation persisting under the Fed’s 2% target. During his presentation to lawmakers this week, Fed Chair Powell said that he expects a bounceback in the labour market, but one that leaves the U.S. far short of the employment levels seen before the pandemic.

Key Movers

Technically speaking, the bearish momentum in the EUR/USD pair has set “lower highs” and “lower lows” this week. Even today, it is falling another 0.15% at the time of this writing. The following support levels for the EUR/USD pair are 1.1168 and 1.1109. And, on the upside, two resistance levels in case of a bounce are 1.1228 and 1.1302.

The Loonie has climbed in the early trading session, fuelled by rising commodity prices and improved risk sentiment on trade optimism. For instance, crude oil rallied around 4% as stronger consumption continued to push physical markets higher, even as many countries struggle to bring the coronavirus under control. Crude oil traders such as Vitol and Trafigura commented about the strength of the demand recovery in recent days. Furthermore, there was a bullish signal that indicated a tighter supply in crude oil, as Iraq agreed to compensate for falling short of its OPEC+ target in May.

However, according to Statistics Canada, retail sales were down by just over one-quarter (-26.4%) in April to $34.7 billion and have fallen by one-third (-33.6%) since physical distancing measures were implemented in mid-March.

Expected Ranges

USD/CAD: 1.3545 – 1.3602 ▼

EUR/USD: 1.1169 – 1.1222 ▼

GBP/USD: 1.2352 – 1.2466 ▼

AUD/USD: 0.6777 – 0.6920 ▼

NZD/USD: 0.6385 – 0.6450 ▼


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Rising unemployment and risk-off tone force AUD lower

OFX Daily Market News

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AUD – Australian Dollar

The Australian dollar drifted lower through trade on Thursday following a larger than anticipated up tick in unemployment and a consolidated shift in risk demand. The Australian dollar fell to 0.6843 after labour market data showed the unemployment rate jumped to 7.1%, as almost 230,000 jobs were lost in May, a print well beyond conservative estimates. Alarmingly the upturn in unemployment came despite a reduction in the participation rate. With many Australian’s giving up the search for re-employment, unemployment statistics fail to capture the true scale of labour market turmoil. Having fallen below 63% the dip in the participation rate masks a much higher rate of unemployment. Had active participation in the workforce remained at January’s high (66.1%) then unemployment would sit nearer 11.5%. With labour market conditions continuing to worsen, yesterday’s print offers a stark reminder of the economic costs sparked by the COVID-19 pandemic. Having touched intraday lows, the AUD found some support in the promise of easing Chinese Monetary policy. The PBOC announced a 20-basis point cut to its reverse repo rate in a bid to stimulate the flow of credit and drive the Chinese recovery. The AUD crept back toward 0.69 before a shift in risk demand prompted another downward correction and push to safe haven assets. With the number of new infections across the US continuing to rise at an alarming rate and Beijing still battling its own outbreak, there is real concern a second wave of infections will derail any economic rebound through the short/medium term. Having slipped back below 0.6850, the AUD opens this morning buying 0.6847 US cents.

Key Movers

A modest risk-off mood prompted a broader push to safe haven currencies overnight, propping up the USD, JPY and CHF. Concerns surrounding an alarming uptick in new infections across the US and a second outbreak in Beijing have prompted investors to reassess expectations surrounding the pace and path of economic recovery. Texas, Arizona and North Carolina all reported a record number of coronavirus related hospitalisations on Wednesday as case numbers across the country continue to rise amid lifting social distancing restrictions. The US dollar edged higher as growth correlated currencies fell.

The Great British pound was the day’s big loser, falling over 1% in the wake of the Bank of England’s policy announcement. The MPC elected to leave the cash rate at 0.1% while confirming an uptick of 100billion pounds to its current QE program. The increase takes the total purchase facility to 745bn and means the program will now run into the end of the year. While the move was largely expected, many analysts were pushing for a larger increase in the asset purchase program. With normal drivers flipped on their head and increased monetary easing/stimulus driving currency gains, the disappointment forced sterling below 1.2450 to intraday lows at 1.2406.

Attentions today remain squarely affixed to the broader risk narrative, with the risk on – risk off environment creating ongoing short term volatility.

Expected Ranges

AUD/USD: 0.6780 – 0.6960 ▼

AUD/EUR: 0.6050 – 0.6130 ▼

GBP/AUD: 1.7920 – 1.8320 ▼

AUD/NZD: 1.0620 -1.0720 ▼

AUD/CAD: 0.9280 – 0.9350 ▼


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