Promise of a vaccine spurs risk on move, driving the AUD back through 0.65

Daily Currency Update

The Australian dollar rallied on Monday rising steadily throughout the day, extending beyond 0.65 to touch intraday highs at 0.6527. Souring risk sentiment forced the AUD lower through trade last week as fears of a second wave of infections enveloped markets. That sentiment shifted on Monday as increased mobility across developed economies fostered hopes of a swift rebound in economic activity, while suggestions early trials of a vaccine by US pharma company Moderna were promising, and reports France and Germany have finally agreed an acceptable framework for a COVID19 bailout agreement helped bolster risk demand and drive equities and commodity currencies higher.
The AUD remains vulnerable to broader swings in risk demand as sentiment continues to shift amidst the ever changing, economic, geopolitical and global health outlook. Having found support on moves below 0.6380 the AUD appears to be forming a new short-term range between 0.6350 and 0.6550/70. While we expect volatility within said ranges to continue a break outside these handles will require a broader shift in the underlying risk tone. Longer term forecasts remain promising as Australia’s outstanding response to the coronavirus outbreak ensures the economy is well placed to open up more broadly than major counterparts, however as risk continues to dominate direction topside gains will remain hard won as the US dollar holds onto haven demand amidst the uncertainty.
Attentions today turn to the RBA’s monetary policy meeting minutes, while commentary from Fed Chair Jerome Powell and a G7 meeting dominate the offshore docket.