RBA commentary and improved risk sentiments helps AUD test break above 0.62

AUD - Australian Dollar

The Australian Dollar upturn continued through trade on Tuesday, building on improved risk sentiment and again testing a break above 0.62 US cents. Confidence across broader financial markets continues to fluctuate on COVID-19 headlines with demand for the Australian Dollar recovering through the week thus far as signs lockdown measures are working. Spain and Italy, two countries the hardest hit by the coronavirus pandemic have reported declining fatality rates through the last few days and discussion begin to turn to how best to ease controls and rebuild normality across daily routines. Having opened below 0.61 the AUD moved steadily upward pushing through 0.6150 and 0.62, touching intraday highs at 0.6208 before edging lower into this morning open.

In other news the RBA maintained its current monetary policy platform and Quantitative easing program. Having purchased $36billion in government bonds to date, the RBA noted it will continue to monitor financial conditions and should things improve it is likely it will reduce the frequency and size and future purchases. The commentary helped bolster bond yields with 10-year bond futures up 10 basis points and helping drive the AUD toward resistance at 0.62.

Attentions today remain with evolving coronavirus headlines ahead of tomorrow’s RBA financial stability review.

Key Movers

The US Dollar fell through trade on Tuesday, succumbing to improving demand for risk and signs the fight against the coronavirus is finally beginning to shift. Spain, Italy and the UK, three of the hardest hit European countries all reported declining infection and fatality rates while New York governor Andrew Cuomo announced they are nearing the peak of the curve. The dollar index fell 0.8%, moving back below 100 to touch 99.92 when valued against a basket of currencies.

The Euro pushed through 1.09 while the pound moved back through 1.23, testing another break above 1.24 despite uncertainties surrounding Boris Johnson’s conditions and the stability of government in his absence. Johnson spent a second night in intensive care after his condition worsened at the weekend, calling in Dominic Raab to deputise as he battles the virus.

Attentions remain affixed to signs of improvement in the fight against coronavirus with the USD underpinned by the sustained uncertainty. We expect investors to remain wary of extending risk plays in the face of the ongoing coronavirus lockdown with demand for risk largely subdued through the weeks ahead.

Expected Ranges

AUD/USD: 0.5980 - 0.6220 ▲

AUD/EUR: 0.5480- 0.5720 ▲

GBP/AUD: 1.9710 - 2.0280 ▼

AUD/NZD: 1.0180 - 1.0380 ▲

AUD/CAD: 0.8520 - 0.8720 ▲