The greenback was favored against major counterparts overnight as US equity markets failed to gain upward momentum despite a raft of M&A activity which generally bodes well for market activity. The DOW and S&P closed down 0.38 and 0.40 percent respectively.
Across the Atlantic, preliminary readings for European and German PMI also undershot estimates which assisted the Euro in trading lower against the greenback. However, prelim figures for European consumer confidence ticked up to -12 from a previous -14. Analysts had expected a more subdued rise to -13.
Contrary to many analysts’ predictions, the prospect of continued political uncertainty failed to stop the Aussie dollar from moving higher overnight continuing an upward trajectory after local market closed yesterday - reaching overnight highs of 89.85 US cents. As the mood turned sour, the greenback became the go-to safety play paring losses throughout the US session. At the time of writing the Aussie is flirting with the 89 US cent levels but looks decidedly like the bias is on the downside. One could also imagine the shortening odds of a labour victory could provide some short term downside in the domestic session. For now, it’ll be a rocky road but the Aussie dollars down but not out.
Upside on the local unit will be contingent on how participants see the election panning out. If we see an expectation of a liberal victory we are likely to see some more value spotting as traders pre-empt a more favourable response in respect to the Mining Resource Rent Tax, however it is also very important to remember growth concerns particularly from the states will still decide where the balance of risk falls and ultimately continue to be the primary driver of the Aussie in the week to come.