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AUD unable to sustain recovery through to the weekly close

Wednesday 1 September, 2021

Daily Currency Update

AUD - Australian DollarThe Australian dollar recovery stalled through trade on Thursday, giving up 0.7280 amid heightened geo-political tensions and hawkish commentary from Fed and FOMC officials. Risk assets were forced lower following two suicide bomb attacks outside Kabul airport. The blasts have reportedly killed 12 US service personnel and 60 Afghan’s and highlight just how quickly everything has unraveled in Afghanistan. Stocks fell over half a percent in the immediate aftermath and the AUD fell through 0.7250 as investors sought haven assets. The AUD came under sustained pressure following comments from key Federal reserve officials. Bullard and Kaplan, known hawks, pushed the case for tapering of bond purchases to start immediately, amplifying expectations the FOMC may amend the current program as early as next month. Our attentions turn now to Fed President Jerome Powell and his address at the Jackson Hole symposium on monetary policy. We expect Powell will stay true to the status quo and refrain from any definitive guidance, but with most analysts now pricing in an adjustment before years end, we are keenly attuned for any signal that might suggest when they will start. The cautious undertone to the session forced the AUD toward intraday lows at 0.7235 and we continue to test this handle leading into this morning’s open.

Key Movers

The US dollar is broadly stronger this morning having advanced against most counterparts through trade on Thursday amid a broader shift to haven assets and a measured approach to risk. The dollar index advanced 0.3% and is now less than a percent off its recent 9 month high, eyeing a sustained run higher following souring sentiment. The JPY remained largely flat as it reaped the benefits of its haven status and the euro proved resilient in the face of a broader risk off move. Having enjoyed renewed demand through the week thus far commodity currencies underperformed, while the Great British pound shifted back below 1.37 to touch 1.3690. While the bomb blasts in Kabul have prompted driven investors toward haven assets, we do not anticipate the market will allow the event to control direction for long and our attentions turn to the Jackson Hole Symposium on monetary policy for direction into the weekly close. Federal reserve hawks have hinted at tapering bond purchases as early as next month, while even those most dovish policy makers have admitted a program of adjustment will need to commence before the year is out. We look to Fed President Jerome Powell for guidance as to the timing and pace. A hawkish Powell outlook could help drive the dollar through recent highs leading into the weekly close.

Expected Ranges

  • AUD/USD: 0.7150 - 0.7290 ▼
  • AUD/EUR: 0.6080 - 0.6190 ▼
  • GBP/AUD: 1.8780 - 1.9020 ▼
  • AUD/NZD: 1.0380 - 1.0520 ▼
  • AUD/CAD: 0.9130 - 0.9230 ▲