Australian dollar is a preferred short at ANZ Bank, but be wary of the growing 'headline risk' ahead of the EU Summit

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Category: Australian Dollar News

Written by Will Peters

"Further range-bound trading seems a good bet again today; this pair currently trades just below 1.5550" - Richard Driver at Caxton FX.

The Australian dollar (Currency:AUD) is currently lacking direction on a dull FX market. We see the pound to Australian dollar just 0.14 pct lower on yesterday's close while the US dollar to Australian dollar rate is 0.05 pct higher at 1.0068.

"We still favour playing AUD from the short side over the medium term, but are wary of growing 'headline' risk ahead of the EU Summit," says a note from ANZ Bank.



Asian stocks saw some relief last night, which leant the Australian dollar some support.

"However, this pair traded in a remarkably tight range, suggesting reluctance amongst investors to take positions ahead of a risky EU Summit. Further range-bound trading seems a good bet again today; this pair currently trades just below 1.5550," says Richard Driver at Caxton FX.

Elsewhere, sterling was able to edge higher against the New Zealand dollar, helped by a weak NZ trade balance figure.

As expected, New Zealand’s trade surplus narrowed in May, driven by lower commodity prices. There was some talk of further Chinese monetary stimulus in the next couple of months, but no major moves were seen on the exchange rates.

"This pair is trading slightly higher at 1.98 but with resistance met at this level, we are likely to see these gains given back," says Driver.

In currency markets, it has been a relatively quiet day ahead of the EU Summit, with little price action in the major currencies.

Officials in the euro area unveiled plans for tighter fiscal integration, which would require the budgets of member states to be pre-approved by all other members (see above).

If agreed upon, the plans would represent a step towards solving the fundamental problem of fiscal integration. However, opposition is likely to emerge from a number of nations during the EU Summit, and as such the FX market has thus far discounted the likelihood of their success," say ANZ Bank.