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AUD struggles continue as domestic and global outlook sours

Thursday 19 August, 2021

Daily Currency Update

AUD - Australian DollarThe Australian dollar plumbed fresh year to date lows on Wednesday, giving up support at 0.7250 amid broader US dollar strength and a further souring in risk demand. Having tracked sideways through the early part of the domestic session, the AUD found some support following the RBNZ policy update. While deferring a much-anticipated rate hike, the RBNZ insisted it was still on track to raise rates through the immediate near term, with the intention to arrive at a neutral level of around 2%. The recent COVID-19 outbreak in NZ and a snap lockdown forced a last-minute re-think to afford the policymakers time to assess the impact on the economy. The AUD touched intraday highs at 0.7270 before a steady overnight decline. Demand for the USD accelerated leading into the release of the Fed’s policy meeting minutes, but with little new forward guidance afforded, the AUD bounced back through 0.7250 before again edging lower into this morning’s open. The AUD remains vulnerable to global forces and near-term pandemic headwinds. With NSW recording its highest level of new daily infections and a surge expected over the coming days/week as the number of those infectious in the community spirals beyond the capabilities of contact tracers, Sydneysiders are bracing for an extension in lockdown protocols. Until NSW controls this outbreak, we can expect cases will leak into other states adding further strain to the national economy. Our focus today turns to labour market data as a leading insight into the impacts of the latest pandemic wave. An uptick in unemployment could be enough to drive the AUD below 0.72 US cents.

Key Movers

The US dollar maintained the week's upward momentum through Wednesday advancing against the majority of major counterparts including the Japanese yen amid a definitive risk-off push. The Dollar index touched four-week highs as the euro was forced toward its lowest level in 9 months, slipping below 1.17 to mark a fresh daily low at 1.1695. Having fallen steeply this week we do expect some resistance to further declines at this handle. Key technical supports at 1.1695 remain intact for now and we anticipate investors will look to take a beat to reassess the recent sell-off. The Great British pound was one of the few currencies to outperform, bouncing off lows at 1.3735 to touch intraday highs at 1.3780. An uptick in CPI inflation numbers helped fuel expectations the Bank of England will be driven to normalise monetary policy in the near-medium term, affording the sterling some relief from the weeks earlier decline. Our attentions remain with global forces as US jobless claims and the Philadelphia Fed Business Index dominate the macroeconomic ticket.

Expected Ranges

  • AUD/USD: 0.7150 - 0.7320 ▼
  • AUD/EUR: 0.6130 - 0.6210 ▼
  • GBP/AUD: 1.8790 - 1.9120 ▲
  • AUD/NZD: 1.0460 - 1.0550 ▲
  • AUD/CAD: 0.9105 - 0.9190 ▼