Forex Market: AUD/USD extends gains as renewed US stimulus hopes support demand for riskier assets

AUD/USD extended gains from the previous trading day on Thursday as renewed hopes over some US fiscal spending supported investor risk sentiment.

Reports emerged stating that US President Trump and House Speaker Nancy Pelosi were open to reaching an agreement on fiscal aid for the airline industry, regardless of that Trump had already called off talks with Democrats for a broader package.

There are also expectations that if Joe Biden wins the presidential election, his administration would accelerate spending to support growth.

“Perhaps the market is a bit more relaxed about the fiscal stimulus story,” Bank of Singapore currency analyst Moh Siong Sim said.

“We might not get fiscal stimulus pre-election, but if polls are right, and we see a Democratic sweep, we will likely get fiscal stimulus late in the year or early next year.”

Risk-on mood was additionally supported by hints at further easing by the Fed. The Minutes from the FOMC’s meeting in September revealed many policy makers had assumed that fiscal spending would support the economy, while some were ready to debate further in regard to the bank’s bond purchasing programme.

On investors’ radar today will be speeches from several Fed officials, including Eric Rosengren at 16:10 GMT and Raphael Bostic at 18:00 GMT, for more hints over policy outlook.

As of 6:55 GMT on Thursday AUD/USD was edging up 0.39% to trade at 0.7162, while extending a rebound from Wednesday’s one-week low of 0.7096. The major pair has inched up 0.02% so far in October, after retreating 2.91% in September, its first monthly loss since March.

On today’s economic calendar, a report by the US Labor Department at 12:30 GMT may show the number of people in the country, who filed for unemployment assistance for the first time during the business week ended October 2nd, probably rose to 845,000, according to market expectations, from 837,000 in the preceding week.

Bond Yield Spread

The spread between 2-year Australian and 2-year US bond yields, which reflects the flow of funds in a short term, equaled 0.5 basis points (0.005%) as of 6:15 GMT on Thursday, down from 0.6 basis points on October 7th.

Daily Pivot Levels (traditional method of calculation)

Central Pivot – 0.7127
R1 – 0.7159
R2 – 0.7183
R3 – 0.7215
R4 – 0.7247

S1 – 0.7103
S2 – 0.7071
S3 – 0.7047
S4 – 0.7023