AUD shrugs off the week’s sluggish start to test 0.74 again

Key Movers

The US dollar marked fresh 2 ½ year lows on Wednesday as the surge in risk demand follows renewed hopes of US fiscal stimulus continues. A bipartisan proposal for a $908 billion relief package bolstered risk demand on Tuesday and continued to drive investors away from the US dollar. Having touched lows at 91.10, the dollar did find some support after Chuck Schumer rejected a Republican Party counter plan. Partisan politics continued to prevent fiscal stimulus from reaching those who really need it and while a compromise seems closer now than before the election there is still a significant gap between the near trillion dollar plan proposed by the Democratic Party and 500 billion dollar package proffered by the Republican Party. Until a deal is reached, the USD may find support as sentiment ebbs and flows on stimulus headlines while the long-term downtrend is expected to remain intact.
The Euro extended gains toward and through 1.21 amid US dollar weakness marking highs at 1.2110, its highest level since April 2018. A turning COVID-19 tide, vaccine hopes and the promise of fiscal stimulus in the new year have combined to drive a resurgence in demand for the shared unit, however with the ECB previously signalling a desire to stem any rapid appreciation our attentions turn to next week's policy meeting for any signs the bank will intervene.
The Great British Pound retreated, unable to capitalise on USD weakness as Brexit negotiations reach a critical juncture. With key sticking points still unresolved, investors are beginning to question whether a deal will be reached in time. Having given up gains above 1.34 Sterling currently buys 1.3364.