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.
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.
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 ▼