Antipodean Currencies Supported by Weaker US Dollar and Commodity Bump

A confluence of factors are supporting AUD and NZD, the main narrative in currency markets remains the weaker dollar as markets assess the prospect of further US fiscal stimulus. Earlier this week, a bipartisan group of senators and representatives proposed a $908bn compromise to encourage Democrat and Republican leaders to allow a vote on fiscal stimulus that could receive support from both parties, the deal must be given authorisation prior to the 11 December deadline to avoid a government shutdown.

• Crude oil prices rose following the announcement from OPEC+ that they would slow the pace of expansion in oil production. The group will look to add 500k bpd (equating to approximately 0.5% of global supply) from Jan 2021 and will hold consultations monthly to approve any further output hikes. The new OPEC+ supply agreement is expected to see stockpiles decline in Q1 2021. The accord was an acrimonious one, and highlights some of the disharmony within the OPEC+ group, indicating the monthly meetings may not be straightforward.
• Iron ore prices increased after Vale downgraded its iron ore production guidance for 2020 by up to 0.6%.
• Fonterra increased their milk price forecast to NZD 6.70‑ NZD 7.30 per kg, driven by demand out of China.
• AUD seems to have more wind in its sails, AUD/NZD last at 1.0517 after rising through the US session and recovering its early dip. AUD/USD is on track its fifth consecutive weekly gain.
• Despite the rise and hitting the highest levels since 2018 against the US dollar, AUD is slightly below its trade weighted average peak hit in September, giving rise to theories that it could yet have further to run before it becomes a concern for the RBA.