The Australian dollar is getting better bid support this morning on the back of Federal Treasurer Scott Morrison’s statements saying he’s opposed to more rate cuts.
“The subtle bid tone is coincident with the uplift in the USDJPY pair this morning which suggests forex traders are reacting to the lessening risk of a Trump presidency,” said Greg McKenna, chief market analyst at CFD and FX broker AxiTrader.
“And though Treasure Morrison doesn’t get to vote at the monthly RBA board meetings, his proxy, Treasury Secretary John Fraser, is a member of the RBA board. “What is important about Morrison’s comment is that it echoes a new theme that politicians around the globe have embraced recently.”
At the open of trade today, the Aussie dollar was briefly back above 76 cents this morning in what has been fairly positive trade after Friday night’s low of 0.7550.
According to McKenna, “What’s important about this change in outlook for the Aussie dollar is that interest rates matter. In the first instance the outlook for the cash rate in Australia matters for the currency. So Morrison’s comments help put a level of support under the Aussie dollar against the US dollar and other AUD crosses.”
Interest rates matter on a relative as well as outright basis. So a change in outlook across the globe, even a tentative one, which has put upward pressure on term rates is also important for the Aussie and the differential with other nations bond rates.
“We’ll see how other markets open a little later this morning. But this early trade suggests the apparent implosion of Donald Trump’s presidential campaign has led some traders to anticipate a risk on rally after today’s presidential debate between the two nominees,” McKenna noted.
At the moment, the Aussie dollar is trapped in a 75-77 cent range waiting for the next shoe to drop in global markets.
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