6th November 2020 - AUD/USD rallied to a new 8 week high as the Fed left its policy stance unchanged


Good Morning,

Market Headlines

Still no final results from the US election although with only four state results still outstanding it is becoming increasingly likely we will see a Biden victory. Risk sentiment continued to trade strongly overnight with the S&P 500 gaining 2.3%, while the NASDAQ was over 2.5% higher. Bond yields reversed higher, and the US dollar fell. Commodities, Brent crude oil futures fell 0.7% to $40.90, copper rose 0.1%, iron ore fell 0.1% to $117.00, and gold rose 2.3%.

Currency

AUD/USD: 0.7166 – 0.7289 (8 week high)

EUR/USD: 1.1729 – 1.1860

GBP/USD: 1.2941 – 1.3135

USD/JPY: 103.54 – 104.47

USD/CAD: 1.3029 – 1.3145

NZD/USD: 0.6692 – 0.6769

AUD/JPY: 74.70 – 75.43

AUD/NZD: 1.0702 – 1.0749

AUD Thoughts

- AUD/USD is in the hands of the bulls on a weaker US dollar.

- The Fed passed by with little new to offer, but the US dollar continues to slide.

AUD/USD has climbed to print a fresh high within the 0.7144 and 0.7289 range, currently trading at 0.7274 in the aftermath of the Federal Reserve meeting. The Fed left its policy stance unchanged, maintaining its 0%-0.25% Fed Funds range, and leaving the pace of QE unchanged at $120bn per month – all widely expected given the election uncertainty. The emphasis is on easing and additional stimulus required from the US government, pressuring the greenback lower this week. Indeed, the US elections have been a positive environment for the higher betas which have tracked a surge in equities, pricing in a relief rally on a Joe Biden victory.

The risk-on conditions are playing out despite the indications that have pointed a to a Biden presidency absent the 'blue wave' that markets had been expecting.

AUD/USD rallied to a new 8 week high of 0.7289 overnight with demand expected to have followed spot higher and now rests ahead of 0.7200 while offering interest is expected ahead of 0.7315 and again at 0.7375.


Event Risk Data Today

Australia: The RBA will release updated growth forecasts in their November Statement on Monetary Policy..

NZ: RBNZ inflation expectations remaining below 2% in the November survey, with low actual inflation pointing to continued softness in expectations.

Germany: The market expects a material rebound in industrial production in September after results disappointed in Aug (prior: -0.2%, market f/c: 2.5%).

US: A further moderation in the payrolls gain is anticipated in the October employment report as the labour market experiences significant churn and COVID-19 risks mount yet again (market f/c: 610k). The market sees softer momentum in employment and rising participation stabilising the unemployment rate at 7.8% in Oct (market f/c: 7.7%).

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