Aussie range bound as currency markets subdued

OzForex Research OzForex Foreign Exchange

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 ▼

Author

OzForex Research

OzForex Foreign Exchange

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