Rate cuts and risk-off tone sees AUD downturn continue

Daily Currency Update

AUD - Australian DollarThe Australian dollar retreated Thursday, continuing the weeks downward trend in what was a typical risk off session. Equities and stocks trended lower as investors looked to haven assets following tighter social distancing restrictions across Europe and a downturn in US domestic data sets. Having opened at 0.7170, the AUD tracked lower throughout the domestic session as the weight of recent comments from RBA governor Phillip Lowe weighed on the currency. Lowe announced the countries Central Bank was reviewing the possibility of further monetary policy easing. In a Q&A session Lowe suggested an interest rate cut to 0.1% was now appropriate given the worst of the pandemic shock was over, allowing the impact of rate adjustments to filter through to the real economy. Lowe’s comments all but guarantee a rate cut next month, an adjustment we expect will be accompanied by upgraded in Quantitative Easing measure. The AUD fell through 0.7150 and continued to drift lower as a risk off mood prompted a break back below 0.71. Fresh COVID-19 restrictions implemented across Europe dampened any lingering expectation of a European led economic rebound and forced investors to look toward haven assets. The AUD, a proxy for growth and positive risk sentiment, was the subject of further selling, slipping to intraday lows at 0.7060 before finding support. Attentions remain squarely affixed to the current risk narrative and developing COVID-19 headlines. While edging marginally higher into the open, the AUD still remains at the lower end of recent ranges and may test supports if we see negative biases finally overwhelm positive sentiment.