AUD – Australian dollar
The Australian dollar tracked lower through trade on Wednesday as markets responded to the US election and looming Trump victory. US equities, treasury yields and the US dollar all rallied as early counting suggested key battleground states were, while hotly contested, leaning toward Trump. With the former President gaining ground in key counties, a pall was cast over Democrat hopes and markets began extending support for the USD. After Trump won crucial states like Wisconsin, Michigan, Georgia, and Pennsylvania, and control of the Senate returned to the Republicans, Americans have given Trump a clear mandate to enact his polices. Having opened the day trading near US$0.6640, the AUD fell steadily, giving up more than 1% before finding support. Having touched intraday lows at US$0.6517, the AUD then recovered to close back near US$0.6590. What does this mean for the AUD through the near term? Trump’s victory likely means a weaker Chinese economy as new and more punishing tariffs are introduced, while question marks surrounding the broader global trade landscape will weigh on risk sentiment. It is likely the AUD will face near term headwinds, and we look to China policymakers for a response to this election result. We expect the AUD will maintain supports on moves approaching US$0.64/65, but the prospect of a rally toward and through US$0.70 is likely delayed.
Our attentions now turn to China Trade Data and US jobless claims and productivity numbers ahead of tomorrow’s all important Federal Reserve policy meeting.
Key Movers
With all eyes on the US election and the likely victory for Trump, markets pushed the Trump trade narrative, extending gains across US equities, yields and the US dollar. Having won the Electoral College vote comfortable and with republicans regaining the Senate, while the house remains too close to call, Americans have given Trump a clear mandate to enact key policies. We expect Trump will move quickly when he steps back into the White House, issuing tighter border controls and punishing tariffs. The US DXY index jumped 1.6% for the day as all 10 Major currencies gave up ground. The euro slipped back below US$1.0740 while the yen was another clear underperformer, allowing the USD to push back above 154.50. As the dust settles on this historic election result, our focus turns now to China Trade data, The Bank of England (BoE) policy meeting and the FOMC rate decision. We expect both the Fed and BoE to cut rates by 25 basis points.
Expected Ranges
AUD/USD: 0.6500 – 0.6620 ▼
AUD/EUR: 0.6050 – 0.6150 ▲
GBP/AUD: 1.9500 – 1.9800 ▼
AUD/NZD: 1.1000 – 1.1100 ▼
AUD/CAD: 0.9080 – 0.9220 ▼