AUD - Australian Dollar

The Australian dollar offered little to excite investors through trade on Thursday, again failing to break above resistance at 0.72 US cents. Risk assets came under pressure overnight as oil prices dipped and President Trump suggested a delay to the Presidential Election in November. Trump’s tweet sparked an immediate risk-off run that forced the S&P 500 lower and saw the AUD touch intraday lows at 0.7120. Republicans were quick to rebuke the suggestions, distancing themselves from the comments while reminding markets any delay would need approval from the Senate and Democrat controlled House of Congress. Having confirmed the delay would not be sanctioned by lawmakers’, attentions turned to whether or not Trump will accept an election result should he lose. Fears the President would reject the outcome prompted a broader USD sell off and the AUD quickly recovered.

Attentions today remain squarely affixed to US lawmakers and updates surrounding the next tranche of Fiscal stimulus. The current unemployment benefit scheme ends today, with no clear plan of secession in place. Failure to implement a stop gap measure will leave millions of Americans out of work without government support. When other major governments are diving deep into the war chest to prop up their economies and those most devastated by the COVID-19 pandemic, the US continues to battle partisan politics. Failure to reach an agreement could prompt heightened volatility on Monday and provide the catalyst to push the AUD through 0.72 US cents.

Key Movers

The US dollar extended its recent downturn amid suggestions of a delay to the November election and a dire economic outlook. The dollar came under heavy selling pressure following the President's suggestion the election should be delayed, ensuring issues with mail voting were ironed out. The comments sparked fears the President would reject the election result, adding increased political uncertainty into an already fragile domestic environment. US GDP all contracted at an alarming rate, with Q2 growth almost 33% down on this time last year. While there have been signs of a recovery since the April low, the US remains in the grips of the coronavirus, unable to curb its spread and while States refused to reinstate lockdown measures, there are signs activity and mobility are levelling off as citizen's activities and patterns change amid fear of the virus. With the US interest yield advantage eroded, a broadly positive risk-on mood and renewed euro demand, the USD is likely to remain under pressure through the back half of 2020.

The euro and GBP both outperformed through Thursday with the single currency continuing to bask in the aftereffects of the EU recovery Fund agreement and largely positive signs surrounding COVID-19 containment. While hotspots for new infections are emerging across the continent, numbers remain manageable (at this stage) and with the rate of infection well short of that in the US, renewed demand for the euro is expected to continue. Having broken 1.18, the currency is poised to move above 1.1850 and extend toward 1.20 in coming days/weeks.

Sterling broke above 1.30 amid ongoing US selling. While the UK remains embroiled in Brexit negotiations and struggles to respond to the economic effects of the pandemic, its recent upturn can only be attributed to broad based USD weakness. Sterling touched 1.3102, before edging lower into this morning Australasian open.

Expected Ranges

AUD/USD: 0.7090 - 0.7230 ▲

AUD/EUR: 0.6020 - 0.6130 ▼

GBP/AUD: 1.7920 - 1.8480 ▲

AUD/NZD: 1.0680 - 1.0820 ▼

AUD/CAD: 0.9530 - 0.9720 ▲

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