Market sentiment improves; AUD staves off break below 0.70

Daily Currency Update

The Australian dollar edged marginally higher through trade on Monday, bouncing off supports at 0.70 US cents as investors looked to unwind some of Friday’s risk off move. Market sentiment improved following reports that suggest the Omicron variant, while bypassing the protections afforded by our current vaccines, will not foster a severe immune response and illness as is the case with other more virulent COVID 19 strains. Initial anecdotal date appears encouraging; however, we anticipate price action will remain whippy over the coming days and weeks as sentiment shifts ahead of any real scientific evidence and data analysis as to the effects this latest mutation. Commodity prices recovered through Monday, lead by a 35 surge in Oil, dragging the CAD and AUD higher on the day. Added support came on the back of the Peoples Bank of China policy update. As expected, the PBOC opted to cut the reserve ratio requirement, opening up accommodative monetary policy conditions while highlighting its support for the commercial building market. Having touched intraday highs at 0.7055 overnight the AUD leveled off into this morning’s open, bouncing between 0.7040 and the daily high. Our attentions turn now to the RBA and its last policy update for the year. We expect few surprises with policy makers likely to maintain the current policy platform. Another dovish assessment could add further pressure downward on the AUD.