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Aussie under pressure as domestic conditions deteriorate

Monday 26 July, 2021

Daily Currency Update

The Australian dollar remained under pressure on Friday, sliding 0.21% to open this morning at a precarious 0.7364. While it was one of the largest declines in a major currency pair for the day, the decline on Friday was nevertheless a welcome outcome for the Aussie after it fell to a fresh 2021 low of 0.7288 earlier in the week. The Aussie found itself treading water throughout the week as the COVID-19 pandemic caused havoc across the country. With the situation deteriorating in NSW and the prospect of a prolonged lockdown on the horizon, domestic economic conditions have turned decidedly sour. The uncertain situation filtered through to the Aussie but was also felt globally to an extent as the Delta variant also raised questions in highly vaccinated countries such as the UK and the US. As a consequence, risk-off sentiment dominated the market early in the week and saw safe havens such as the US dollar strengthen. Nevertheless, risk sentiment turned decidedly positive at the close of the week with Wall Street flirting with record highs on Friday and helped to somewhat temper Aussie weakness. It will be a slow start on the economic calendar this week with COVID-19 headlines set to dominate direction. Later in the week, attentions will turn to some data points from Wednesday with Australia's CPI reading as well as US GDP and a FOMC statement on Thursday.

Key Movers

The Japanese Yen recorded the largest decline on Friday, falling 0.34% against the greenback to open at 110.51. Widely considered to be a 'barometer of fear' the increase in the USD/JPY signals a positive turn in risk sentiment on Friday which was also reflected on Wall Street. Nevertheless, the USD/JPY traded under pressure through the week as the Delta variant added an element of uncertainty in financial markets. Tellingly, the Delta variant has seen infections rise in a number of vaccinated countries including the USA which has dampened prospects of rising inflation and consequent tapering of the bank's bond buying. Adding to the Japanese Yen's woes are reports of increasing infections in Japan. While reports of athletes and organisers testing positive to COVID-19 have not stopped the Olympics from moving forward, cases are edging higher and there are concerns that the Olympics will prove to be a super-spreader event. Ultimately, global risk sentiment shrugged off these concerns somewhat on Friday with the Japanese Yen reversing course and falling against the greenback. Nevertheless, the pair remains under pressure and watchful of COVID-19 headlines.

Expected Ranges

  • AUD/CAD: 0.9197 - 0.9308 ▼
  • AUD/EUR: 0.6217 - 0.6292 ▼
  • GBP/AUD: 1.8561 - 1.8785 ▲
  • AUD/NZD: 1.0489 - 1.0616 ▼
  • AUD/USD: 0.7324 - 0.7413 ▼