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Australian dollar lower – little surprises from FOMC minutes

Thursday 8 July, 2021

Daily Currency Update

AUD - Australian DollarA buoyant US dollar saw the Australian dollar trade lower overnight as sentiment was aided by the FOMC meeting minutes which simply reiterated known concerns. AUD/USD roundtripped from 0.7485 to 0.7534 and back to settle lower around the 0.7460 handle. The NZD was a similar story, once again dipping below 0.7000 to 0.6990 before settling around 0.7015. AUD/NZD continued its slide lower to reach a one-month low at 1.0671. Yesterday’s FOMC minutes were the key release of the day and delivered no surprises to markets. Although QE tapering was raised, there was no evidence of urgency from the Fed in slowing down the pace of bond purchases. The message of needing to see ‘substantial further progress’ on the economic front was a continuation of previous messaging. Looking ahead to today, RBA governor Lowe is set to speak about both the labour market and monetary policy. The speech will be delivered to the Economic Society of Australia at 12:30pm and will be watched closely by markets that are expecting him to reiterate the cautious optimism he mentioned earlier in the week. Topside targets can be seen at 0.7500 and 0.7590 whilst the daily low of 0.7445 represents the first lines of support.

Key Movers

Despite a relatively flat Wednesday there was some movement in Europe that saw the euro decline to a three-month low against the greenback. Falling to as low as 1.1781, the euro traded to a variety of variables. Domestically, the euro succumbed to less than impressive macroeconomic figures with May’s Industrial Production falling well below expectations. This was somewhat counteracted by the close however by optimism after the FOMC minutes which buoyed risk assets including the euro. Overall, the euro opens this morning at 1.1798.It was a similar story across the channel with the sterling see-sawing through the session to close relatively unchanged. Domestically, UK macroeconomic data failed to impress with the June Halifax Price Index contracting by 0.5% MoM and missing the market's expectations. Adding fuel to the fire was also another 32,000 COVID-19 cases (the biggest single-day increase since January) which further undermined local optimism. The sterling nevertheless traded at the whims of the FOMC and remains relatively unchanged despite a rollercoaster day to open this morning at 1.3803.

Expected Ranges

  • AUD/USD: 0.7445 - 0.7520 ▼
  • GBP/AUD: 1.8350 - 1.8550 ▲
  • AUD/NZD: 1.0640 - 1.0710 ▼
  • AUD/EUR: 0.6320 - 0.6370 ▲
  • AUD/CAD: 0.9320 - 0.9380 ▲