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Aussie plumbs new lows as risk sentiment evaporates

Wednesday 18 August, 2021

Daily Currency Update

AUD - Australian DollarThe Australian dollar gave up 0.73US cents on Tuesday, marking fresh year to date lows below 0.7250 as risk sentiment soured overnight. Having opened the day firmly entrenched within recent ranges, the AUD came under early pressure after the RBA minutes suggested policymakers would be prepared to provide added stimulus should the Sydney and Melbourne lockdown have a marked effect on the economic recovery. NSW continues to grapple with this latest outbreak, unable to stem the tide of infections despite rising vaccination rates and harsher lockdown restrictions. With the strictest of social distancing measures expected to be in place through September and most likely October, there is little doubt the economic recovery will face serious headwinds. Having tested a break below 0.73 toward the end of the domestic session, investors extended the AUD downturn amid a broader correction in risk demand. US retail sales fell sharply through July, prompting a correction across equities that permeated currency markets. The USD enjoyed broad based upside as investor sought haven assets, and the AUD touched lows at 0.7243.Having broken the recent July low, the AUD is now vulnerable to further risk led corrections and changes in RBA policy expectations. Our attentions turn now to Thursday’s labour market print for the first real look into the impact of the Sydney lockdown on the labour force. An uptick in the unemployment rate could well force the AUD through 0.72 and toward supports at 0.70.

Key Movers

The USD tracked higher overnight, bolstered by a surge in risk demand in what was a more traditional response to a shift in risk appetite. Growing COVID-19 concerns both domestically and globally had the market on edge, and a sharp decline in US retail sales through July sent investors chasing haven assets. The dollar index advanced 0.5%, buoyed by a steep correction across the GBP and EUR, even extending through 109.55 against the Japanese yen. The euro plunged through 1.1750 to touch intraday lows at 1.1710 while GBP offered little resistance as it cruised through 1.38 and 1.3750, marking fresh lows at 1.3730. As the prolific spread of the Delta variant derails the global economic recovery, near term headwinds are finally overwhelming long held optimism for a full and swift economic rebound. Our attentions today turn first to the RBNZ policy update, then shift to GBP and Canadian CPI data ahead of the FOMC minutes.

Expected Ranges

  • AUD/USD: 0.7150 - 0.7320 ▼
  • AUD/EUR: 0.6150 - 0.6230 ▼
  • GBP/AUD: 1.8820 - 1.9080 ▲
  • AUD/NZD: 1.0350 - 1.0620 ▲
  • AUD/CAD: 0.9110 - 0.9230 ▼