Australian Dollar Shrugs Off US-China Tensions and Renewed Lockdowns

Australian Dollar (AUD) Traders Shrug Off Reintroduction of Lockdown Measures

The Australian Dollar (AUD) continued to make significant gains on Wednesday. Risk appetite rose and traders shrugged off US-China tensions as market sentiment continued to be buoyed by the EU agreeing on a fiscal stimulus plan.

Added to this, the reintroduction of lockdown measures in Australia’s second-biggest state had little impact on the ‘Aussie’.

Looking ahead, a lack of economic data from Australia means traders will continue to monitor any shift in risk appetite. If markets remain optimistic, AUD will continue to make gains.

Pound (GBP) Slides as No-Deal Brexit Fears Rise

The Pound (GBP) suffered widespread losses on Wednesday as concerns the UK could face a no-deal Brexit increased. Traders also worried about the dire prospects for the country’s economy as Britain emerges from the coronavirus lockdown.

Brexit has taken a backseat due to the pandemic, although with the transition period nearing its end, traders worried about reports of the UK ‘giving up’ on negotiations and whether London and Brussels would be able to reach a deal.

However, Sterling could claw back some losses later today if the latest CBI Business Optimism Index rises higher than expected for the third quarter.

Euro (EUR) Extends Gains Following EU Recovery Fund

The Euro (EUR) extended its gains on Wednesday, still supported by Tuesday’s success after the European Union agreed on a coronavirus recovery fund.

EUR received further support as market gauges measuring a break-up of the bloc have fallen silent. This suggests fears of another crisis for the Eurozone have eased. In recent years investors have focused on Italy, but its Economy Minister Roberto Gualtieri said the government had been supported by the ‘historic’ agreement.

The single currency could make further gains today if GfK show German consumer confidence jumped more than expected in August.

US Dollar (USD) Slides as Risk-on Mood Continues

The US Dollar (USD) slipped on Wednesday as the optimistic mood amongst markets continued as traders shrugged off the increase in US-China tensions.

China’s foreign ministry claimed Washington told Beijing to close its consulate in Houston, Texas. This marked a serious deterioration in relations and caught markets off guard. However, the reaction was short-lived and positive sentiment returned to markets and weighed on the safe-haven ‘Greenback’.

Looking ahead, traders will be eagerly awaiting the latest US jobless claims data. If initial claims do not rise as high as expected, it could boost risk appetite further.

Canadian Dollar (CAD) Struggles despite Best Inflation in Over Nine Years

The Canadian Dollar (CAD) struggled to make significant gains during Wednesday’s session as oil prices slumped after a larger-than-expected build up of inventories in the US. Losses were limited, however, after the country’s annual inflation rate posted its largest increase in over nine years.

Looking ahead, if oil prices continue to slide as traders fret over whether oil demand in the US will recover, it will send the ‘Loonie’ lower.

New Zealand Dollar (NZD) Hits Six-Month High

The New Zealand Dollar (NZD) was able to hit a six-month high against the US Dollar on Wednesday as traders were optimistic about the local economic outlook.

The ‘Kiwi’ continued to rise in the afternoon as traders shrugged off heightened US-China tensions. The short-lived slide in sentiment was in reaction to China’s foreign ministry stating the US told it to close its consulate in Texas. If markets remain optimistic, it will send NZD higher.

Upcoming Data

23 July 16:00                       EUR                        GfK German Consumer Confidence (August)        -4

23 July 20:00                       GBP                       CBI Business Optimism Index (Q3)                            -38

23 July 22:30                       USD                       Initial Jobless Claims (18 July)                                     1295K

24 July 00:00                       EUR                        Flash Consumer Confidence (July)                            -12

Louisa Heath

louisa.heath@torfx.com


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