AUD Off The Canvass with Boost to Equities
AUD
The AUD finally ended its recent downward slope, with reasonable gains across the board, except for GBP. US Equities were floating just below record highs while US 10 Year Bond Yields dipped 3 bps, both likely gave the AUD some upside support. The Aussie ASX closed at records high yesterday as well, gaining 1.1%. Which could possibly symbolize markets still maintaining some level of positive risk sentiment, despite the recent lockdowns across Australia. Commodities also had a mixed performance, with Iron Ore dropping -0.4% and Copper gaining 1.5%. As a commodity currency, the AUD likely gained some support of the back of these commodity price movements. In other positive news, the Australian soccer team bested Argentina in the Olympics, winning 2 – 0. Flash Services and Manufacturing data for our local economy was release earlier this morning, both measures showing deterioration compared to last month's numbers, the Services number dropping heavily in what is a bad omen for next month's numbers considering the current state of lockdowns around the country.
USD
The AUD/USD managed to crawl back north during the overnight session, currently trading in at a rate of 0.7382 at time of writing. US Equities had a modest overnight session, with the S&P500 and NASDAQ gaining 0.2% and 0.4% respectively. Due to the AUD’s recent high correlation with US stocks, this could have also supported the AUD in recovering some of the recent losses. US Unemployment Claims came in worse than expected at 419K (vs exp 350k) overnight. The weaker data likely took some downward pressure off the AUD. Flash Manufacturing and Services PMI data is scheduled to be released later tonight, if the results are strong, the AUD could be under the pump yet again.
EUR
The AUD/EUR also managed to push north, trading at a rate of 0.6269 at time of writing. Overnight the ECB announced that they plan to maintain their ultra-loose monetary policy, and will not tighten even if short-term inflation overshoots. This tone from the ECB around their monetary policy somewhat relieves pressure from the RBA, as investors may be less concerned with the RBA’s relatively conservative approach to their tapering policy. This switch in investor outlook may help explain the slight return north for the AUD. Europe is looking to finish the week of with a bang, both French and German Manufacturing and Service PMI scheduled to be released later this afternoon.
GBP
The AUD/GBP is one of the very few currency pairs to remain trading flat, currently trading in at a rate of 0.5359 at time of writing. The BoE’s Deputy Governor Broadbent projected a very dovish stance towards the BoE's tapering policy, echoing the common view that the current inflation rise is temporary and looking at projected inflation (18-24 months ahead) would be more relevant for current monetary policy decisions. The UK is also scheduled to release their Flash Manufacturing and Service PMI data later this afternoon, markets will be watching for any unexpected results.
NZD
The AUD/NZD also made some slight gains during the overnight session, currently trading in at a rate of 1.0577 at time of writing. The NZD looking to finish the week of quietly, with no significant data scheduled to be released.