AUD – Australian dollar
The Australian dollar declined during Wednesday’s trading, returning to 0.76 US cents. While the week has been calm so far, the Aussie struggled to maintain the direction it enjoyed yesterday’s trading, dropping to highs approaching 0.77 amid a broader correction in commodity currencies. With few catalysts to move in the right direction, investors still lack confidence, constrained by uncertainty about the pace of recovery. While the recent shift in risk sentiment has resulted in lower demand for the Australian dollar in the near future, we expect continued immunization programs and reduced exposure to COVID-19 to trigger a return to accelerated global growth and positive risk premiums. Trying to move beyond 0.7680, we expect the Aussie to remain vulnerable on a move closer to that level, with our year-end forecast downgraded from 0.82-0.85 to highs close to 0.80.
Regardless of today’s macroeconomic ticket, we expect the Australian dollar to remain within the 0.7580 to 0.7700 US cents range.
Key driving forces
The US dollar edged higher on Wednesday, advancing against most of the major currencies outside the euro. The FOMC minutes did little to change broader market attitudes, but only reaffirmed the Fed’s current position and commitment to past-oriented policies. The euro continued to keep pace with the dollar breaking through 1.19 to a high of 1.1915 before trading back to 1.1870 at the open this morning. GBP continued its weekly struggle, dropping to 1.38 and hitting session lows of 1.3720. After the pair dipped below 1.39 on Tuesday, sustained weakness remains a mystery as no obvious catalyst for the pound’s correction is in sight. The only event that may have had an impact on the pound was confirmation that the British medical regulator has revised its recommendations for the AstraZeneca vaccine, offering an alternative to those under 30. With the UK immunization program heavily reliant on the AstraZeneca vaccine, the darkening clouds may have dampened optimism about an early recovery from COVID-19.
Ignoring the macroeconomic ticket of the day, we continue to pay attention to variable market flows. We expect foreign exchange prices to remain largely subdued, save for an unplanned news shock.
AUD / USD: 0.7530 – 0.7720 ▼
AUD / EUR: 0.6370 – 0.6490 ▼
GBP / AUD: 1.7920 – 1.8180 ▲
AUD / NZD: 1.0790 – 1.0870 ▲
AUD / CAD: 0.9550 – 0.9680 ▼