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FX tailwinds shift from USD to AUD and EUR

Softening US Treasury yields surprised the markets last week, shifting tailwinds away from the US dollar towards risk-on currencies.

Posted Apr 19, 2021

Biden’s upcoming climate summit may also help commodity currencies like AUD & CAD exposed to copper/aluminium that play key roles in electric vehicles and solar/wind power.

Australian dollar (AUD)

AUDUSD ChartAUDUSD at 0.7779 has risen 0.9% above its 90-day average, range 0.7582-0.7976. 7D▲+2.1% 30D▲HIGH AUD-USD Rates

The Australian dollar enjoyed a sharp uptick last week, advancing above US77c through resistance amid a heightened demand for risk and lower US Treasury yields. The opening of the Trans-Tasman bubble between Australia and New Zealand also offers some hopeful signs for the AUD. AUD Markets

OFX predict that if AUD/USD can’t break the 0.80 level again (USD/AUD 1.25) then this could see investor demand for the antipodean currency waiver. AUD-USD Forecasts

The Euro continues to struggle in 2021 against the Aussie dollar with AUD/EUR near 2-YEAR HIGHS (over €0.64) due to the Aussie dollar strength and uncertainties over the Eurozone Covid vaccine roll-out. AUD-EUR Forecasts

British pound (GBP)

GBPUSD ChartGBPUSD at 1.3830 is near its 90-day average, range 1.3644-1.4147. GBP-USD Rates

The coronavirus pandemic had replaced Brexit in the headlines for most of last year. In 2021 the pound has held or even improved its value while markets sort through the aftermath of Brexit and the improved vaccine response from the UK. GBP Markets

ING predict GBP/USD should breach 1.50 this year. While risks remain in place (the negative headline news around the Scottish independence referendum; the ongoing risk of tariffs should UK government choose to deviate from EU labour laws) GBP-USD Forecasts

NAB have revised upwards their Aussie to pound sterling forecasts now expecting the GBP/AUD rate to be at A$1.88 by June 2022. For 2020, it sees GBP to remain at A$1.81 at year-end. GBP-AUD Forecasts

Canadian dollar (CAD)

CADUSD ChartCADUSD at 0.7994 has risen 0.9% above its 90-day average, range 0.7782-0.8060. 30D▲HIGH CAD-USD Rates

Canadian Dollar exchange rates have gained amid Canada’s economic outlook and recovering oil prices. Early success in controlling COVID-19 has helped the Canadian economy to rebound as massive government aid boosted consumer spending and low interest rates fueled a surge in the housing market. CAD Markets

If risk sentiment continues to improve, the CAD is well placed to extend recent gains. In the longer term, there is a perception Canada will enjoy a renewed close trade relationship with the US, with Biden as US President. USD-CAD Forecasts

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Euro (EUR)

EURUSD ChartEURUSD at 1.1954 is just below its 90-day average, range 1.1718-1.2174. EUR-USD Rates

April has been a good month for the Euro – despite Europe still struggling with third Covid waves. But recent higher European vaccination gives markets confidence in a European recovery later in the quarter. EUR Markets

The pound strength has hit a snag in April on concerns relating to AstraZeneca shot – which the U.K. is heavily dependent on – while the euro has strengthened on good immunisation numbers coming out of the eurozone earlier than expected. GBP-EUR Forecasts

Indian rupee (INR)

USDINR ChartUSDINR at 74.58 has risen 2.0% above its 90-day average, range 72.29-75.18. USD-INR Rates

The Reserve Bank of India’s announcement of a huge government bond purchase programme in April has ended the Indian rupee’s resilience to U.S. dollar strength and other currencies such as GBP and AUD. INR Markets

The RBI’s QE announcement ended the Indian rupee’s good run versus the U.S. dollar sending it back below 74 to the greenback. USD-INR Forecasts

New Zealand dollar (NZD)

NZDUSD ChartNZDUSD at 0.7138 is just below its 90-day average, range 0.6956-0.7443. NZD-USD Rates

NAB’s forecast for NZD/USD is for the kiwi to rise to 0.76 by the end of the year against the greenback. NZD Markets

National Australia Bank (NAB) have revised upwards their Aussie/Kiwi dollar forecasts now expecting the AUD/NZD rate at NZ$1.09 by June 2021, up from their previous forecast of NZ$1.06. AUD-NZD Forecasts

US dollar (USD)

USDX ChartThe U.S. Dollar Index at 91.68 is just above its 90-day average, range 90.04-93.28. US-Dollar index

The dollar ended last week falling to 1 Month lows. Risk sentiment tilted towards higher risk assets and currencies as US data showed strong signs of growth in several key sectors of the economy. Low US Treasury yields of 1.7% make the dollar less attractive in comparison to other investments. USD Markets

Swiss bank UBS see the EUR/USD rate to rise near 1.27 (USD/EUR below 0.78) by the end of 2021 as the world recovers from the pandemic and has less need for USD as a safe haven. USD-EUR Forecasts

The peso has regained strength against the US dollar that it lost mid-February. Into April the peso has increased in value with USDMXN back below 20 and well below its 90-DAY average. USD-MXN Forecasts

   
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