AUD/USD: Big Aussie Weekly Gains Begin to Stall out

The Australian dollar was down against the US dollar on Thursday in contrast to other G10 currencies that were mostly higher against the greenback. The currencies of the USA, Australia and Canada, all of whom just cut interest rates this week were the notable underperformers on Thursday.

AUD/USD was lower by 20 pips (-0.30%) to 0.6605 with a daily price range of 0.6584 to 0.6637 as of 4pm GMT.

AUD/USD slid underneath 0.66 before later rebounding to slightly below the day’s opening level. Weekly gains in the exchange rate remain at an impressive +1.47%, even after accounting for today’s drop.

The Australian dollar

January trade data, although better than forecast was stale and did little to help the Aussie on Thursday. The expected slump in Australian exports to China has not yet made its way into the official data but many expect it to by February and March. Australia’s January trade surplous fell less than forecast to 5,210 million from 5,223 million prior.

A downturn in risk sentiment across broader markets which saw havens like gold and US Treasuries gain saw the Australian currency tumble as a proxy for China and global growth. The Aussie has had a good week, but gains could be capped while the coronavirus effect on economic growth is still so unknown.

The US dollar

The democratic primaries were taking a backseat on Thursday following the ‘Biden bounce’ on Wednesday. Or more likely they always were but markets just remain extremely volatile, with shares, bonds and currencies swinging from big gains to losses every day. Elizabeth Warren officially dropping out of the Presidential race is a small boost to Bernie Sanders but was already expected after her poor showing on Super Tuesday.

The dollar was stalking the bond market as US Treasuries saw the 10-year yield fall back below 1%. Markets are already calling for the Federal Reserve to do more than the emergency rate cut of 50 basis points this week. Markets pricing now indicates a 70% chance the Fed cuts another half-a-percent from interest rates at the March 18 meeting.

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