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  • Australian Dollar (AUD) boosted by Australia – UK trade deal hopes
  • Coronavirus second wave fears weigh on sentiment supporting US Dollar (USD)
  • Attention moves to Jerome Powell testimony and Australian labour market data
  • At 14:15 UTC, Australian Dollar US Dollar exchange rate trades flat at US$0.6886

The Australian Dollar is trading flat versus the US Dollar as investors await fresh impetus. At 14:15 UTC, AUD/USD is trading at US$0.6886 after settling at the same level on Tuesday. The pair has traded within a tight range of US$0.6852 – US$0.6923.

Risk aversion stemming from escalating tensions between China and India and a flare up of coronavirus cases in Beijing, improved on Wednesday. As a result, demand for riskier currencies such as the Aussie Dollar, increased, which safe haven flows declined.

Optimism surrounding an Australian UK free trade deal for the post Brexit era is also offering support to the Australian Dollar. Negotiations are due to start mid-July and both sides are keen to reach a deal by the end of the year. The UK is Australia’s seventh largest trading partner.

News that Australia is considering opening a travel bubble with New Zealand in the coming weeks is adding to the positive mood surrounding the currency.

Meanwhile concerns over a second wave of coronavirus infections in Beijing and the US are refusing to disappear. Chinese authorities have taken measures such as stopping flights into Beijing and closing schools to stem the spread of the virus. These concerns are keeping the safe have US Dollar buoyant, whilst exerting downside pressure on the riskier Australian Dollar.

Australian Dollar investors will now look ahead to the closely watched labour market data. Unemployment in Australia is expected to tick higher to 7% in May, up from 6.2% in April. The number of payrolls is expected to decline by -125,000. This is a steep drop but still significantly better than the -625,000 fall in April’s payrolls.

There is no high impacting macro economic data due for in the US today. Instead investors will be watching Federal Reserve Jerome Powell as he testifies before Congress for a second day. Investors will be keen to see whether he continues with his cautious tone. Yesterday Jerome Powell warned of a long road to recovery following the coronavirus crisis, even after US retail sales rebounded strongly in May.