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AUD edges upward as USD falters
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Daily Currency Update
The Australian dollar found support on Monday as the US dollar enjoyed a slow start to the week. Having tested fresh lows near US$0.6450, the AUD rebounded back through US$0.65 in the later hours of the overnight session. US treasuries traded sideways and an absence of major headline news flow saw markets take stock of recent dollar gains and the opportunity to square positions and take profit.The question now is, is this the beginning of an AUD consolidation? We still see significant headwinds in play for the AUD. The Trump effect is likely to weigh on the currency as the spillover effects of tariffs weigh on China and global demand, subsequently dampening demand for the AUD. That said, the US dollar is starting from a higher base than it did in 2016 and a Trump victory was largely priced in. Risks stem from the uncertainty associated with Trump’s second stint in the White House. Should Trump adopt a more aggressive US policy stance, the AUD could slide toward and through US$0.63, while a moderated US stance could help fuel a rebound back toward US$0.66/67. We expect to make ongoing revisions to forecasts as policy details emerge through early 2025.
For now, our attentions turn to European wage data and US housing starts while Trump news continues to drive direction.
Key Movers
The US dollar fell on Monday as US equities rallied and treasury yields traded sideways amid a lack of headline news flow. Having enjoyed early gains, the dollar performed an abrupt about-face during overnight trade, giving up gains and tracking lower against all majors outside the Japanese yen. With the euro and GBP finding support, the dollar index opens this morning three-tenths of a per cent below Friday’s close.The Japanese yen was the day’s notable underperformer, failing to capitalise on US dollar softness, tracking lower after Bank of Japan Governor Ueda refused to be drawn on whether policymakers will lift rates next month. With the yen under pressure, markets were looking to Ueda to support the currency and his failure to do so has forced a correction in market expectations for the BoJ’s December meeting. It seems clear policymakers are bent on assessing risks and additional data received.
Our attentions turn now to European wage data, US housing starts and Canadian CPI data while stories about President-elect Trump and his cabinet appointments continue to drive direction.
Expected Ranges
- AUD/USD: 0.6400 – 0.6550 ▲
- AUD/EUR: 0.6080 – 0.6180 ▲
- GBP/AUD: 1.9300 – 1.9600 ▼
- AUD/NZD: 1.1000 – 1.1100 ▲
- AUD/CAD: 0.9080 – 0.9180 ▲
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