The Australian dollar continued to push higher in overnight trade, underpinned by the same factors that drove it higher in Monday’s Asian session – receding UK Brexit fears.
“Positive sentiment about the outcome of the UK’s EU referendum has run through financial markets overnight,” said Joseph Capurso, senior currency strategist at the CBA.
“The major European equity markets have risen by over 3%, core bond yields have generally lifted while peripheral Eurozone bond yields have declined, and base metal and energy prices have increased.”
After closing the Asian session at .7450, the AUD/USD briefly rose to as high as .7480 in early European trade before easing lower over the course of North American trade.
Eventually it closed the session buying .7457, a gain of 0.82% from Friday’s closing level. It is currently trading at .7453 in early Asian trade on Tuesday.
From the lows struck on Thursday last week, the AUD/USD has now rallied 2.5%, suggesting that a so-called “Bremain” outcome for the UK referendum is now largely priced in by markets.
While this has been the prevailing view expressed by investors overnight, as Capurso points out, the polling remains close, and largely indecisive.
“Opinion polls slightly favour the ‘remain’ campaign, but overall polling is still tight and it is too early to call the referendum outcome,” he says. “Given the fickle nature of markets and the various UK political events scheduled over the coming days, market volatility should remain high.”
Although upcoming Brexit polls will continue to drive the Aussie, along with markets as a whole, traders will also be on alert today for the release of the RBA’s June monetary policy meeting minutes at 11.30am AEST.
“There are some modest upside risks to AUD from the RBA minutes, unless the minutes unexpectedly reveal the RBA discussed a rate cut,” suggests Capurso.
There are also two speeches arriving from RBA officials, including deputy governor Guy Debelle at 9.25am AEST, although neither is expected to generate significant levels of volatility for the Aussie in Capurso’s opinion.
Elsewhere the economic calendar is bare, ensuring that sentiment towards the Brexit vote will likely remain the overriding theme dictating movements during the session.
Here’s the Aussie dollar scoreboard as at 7.55am AEST.
- AUD/USD 0.7453 , -0.0004 , -0.05%
- AUD/JPY 77.47 , -0.02 , -0.03%
- AUD/CNH 4.9099 , -0.0037 , -0.08%
- AUD/EUR 0.6588 , -0.0001 , -0.02%
- AUD/GBP 0.5077 , 0.0006 , 0.12%
- AUD/NZD 1.0481 , 0.0017 , 0.16%