Positive risk backdrop and lower yields help AUD climb back above 0.7650

AUD - Australian Dollar

The Australian dollar pushed off lows at 0.76 US cents overnight, creeping back through 0.7650 amid a risk positive backdrop and dip in US Treasury yields. Equities continue their push higher, following dovish commentary from Fed Chair Jerome Powell. Powell reassured investors the Fed is committed to its accommodative policy platform, highlighting the inconsistency of the recovery to date. The Fed seems set on a backward approach to monetary policy adjustments, waiting to see sustained and consolidated improvement across macroeconomic indicators. The dovish outlook helped drive the S&P500 and Euro Stoxx higher, dragging the AUD toward intraday highs at 0.7660.

While the broader risk narrative remains positive, AUD upside appears restrained to moves approaching 0.77/0.7720 through the short term. Concerns surrounding the AstraZeneca vaccine have weighed on market conviction and dampened hopes the majority of the population will be vaccinated by October. With little of note on today’s domestic ticket we expect the AUD will continue to bounce between 0.7590 and 0.77 US cents.

Key Movers

The US dollar index fell through trade on Thursday giving up 4 tenths of a percent amid a shift in US treasury yields and positive risk backdrop. So far this month the dollar has retreated from four and half month highs seen in late March, giving up ground to commodity currencies, the euro and the yen, as investors consolidate positions and correct expectations, searching for a catalyst to drive conviction. The euro pushed back through 1.19 to touch intraday highs at 1.1926, while USD/JPY has given up gains above 110, retreating toward 109 following a correction in Treasury yields.

Surprisingly the Great British pound continued the weeks downward correction, dipping below 1.3750 to mark fresh lows at 1.3720. The AstraZeneca vaccine remains a lynchpin in the UK’s vaccination program and with concerns the vaccines rare side effects may limit its rollout program, the timeline to recovery has been extended as regulators and officials rush to secure an alternative for younger Britons.

With little of note on today’s macroeconomic ticket we expect moves across currency markets will remain largely muted.

Expected Ranges

AUD/USD: 0.7590 - 0.7720 ▲

AUD/EUR: 0.6390 - 0.6470 ▲

GBP/AUD: 1.7820 - 1.8120 ▼

AUD/NZD: 1.0790 - 1.0870 ▼

AUD/CAD: 0.9550 - 0.9630 ▲