Aussie dollar opens slightly weaker against the greenback
Monday 6 December, 2021
Daily Currency UpdateThe Australian dollar continued to fall to new lows against the greenback closing on Friday at the lowest since July 2020 down towards the 0.70 level. The Aussie dollar has been hit hard recently with the emerging Omicron COVID-19 variant, which could weaken global growth prospects. The greenback has been rallying across the board of late as the Federal Reserve has been gearing up to tighten monetary policy faster than the market had previously anticipated.
On the data front last Friday we saw the release of October Building Permits which plummeted 12.9% (month on month) and third-quarter Gross Domestic Product which contracted by 1.9% (Quarter on Quarter) better than the -2.7% expected. Looking ahead this week, and it's quite a busy week ahead, volatility is likely to stay elevated. On Monday we will see the release of the November TD Securities Inflation. The Reserve Bank of Australia has noted that higher inflation won’t affect their monetary policy stance and that a rate hike before 2024 is unlikely. The Reserve Bank of Australia will meet on Tuesday with market expectations official interest rates will be left on hold once again at 0.1%. From a technical perspective, the AUD/USD pair is currently trading at 0.7002. We continue to expect support to hold on moves approaching 0.6960 while now any upward push will likely meet resistance around 0.7100.
Key MoversGlobal markets mood soured last week. Risk aversion meant that traders flocked into the safety of the US dollar. The US Dollar Index hit its highest level since July 2020 last week with the US Federal Reserve signalling a faster pace of tapering (QE wind-down process). The bond market has moved some way to price in a greater risk of early hikes with three-year yields having climbed to 0.94% from 0.25% at the end of September. Longer-term bonds have had a more bullish run in line with a rally in Treasuries, taking 10-year yields down almost 15 basis points this week to 1.644%.
Looking ahead this week, all eyes will be on the US Consumer Price Index (CPI) report on December 10th. Headline inflation is expected at 6.8% y/y in November, up from 6.2% in October. That would be the highest rate in almost 40 years. The core reading, which excludes energy and food items, is estimated at 4.9% y/y from 4.6% prior. Further upside surprise could increase hawkish Fed policy bets for 2022, risking volatility in markets.
- AUD/USD: 0.6900 - 0.7100 ▼
- AUD/EUR: 0.6080 - 0.6280 ▼
- GBP/AUD: 1.8750 - 1.8950 ▲
- AUD/NZD: 1.0230 - 1.0430 ▲
- AUD/CAD: 0.8870 - 0.9070 ▼