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Australian dollar rallies to the highest level since mid-July

Monday 6 September, 2021

Daily Currency Update

The Australian dollar is stronger when valued against the greenback. On Friday the pair reached a high of 0.7477. The highest level since mid-July and advancing for a second consecutive week as investors sold the greenback on speculation the US Federal Reserve will have to put tapering in the hold for now. Last week the Aussie dollar found some footing after Australian GDP came in at 0.7% q/q for the 2nd quarter against expectations of 0.4%, according to a Bloomberg survey. Annual GDP had some upward revisions and printed at 9.6% against 9.1% expected. Trade data showed a surplus of AUD12.1 billion for July against 10 billion that the market was looking for. Looking ahead this week and on Monday we will see the release of the August TD Securities Inflation, foreseen at 0.5% MoM, and the AIG Performance of Services Index, previously at 51.7. On Tuesday the Reserve Bank of Australia meeting takes on more significance for the Australian dollar. At the July monetary policy meeting, the board announced that they would reduce government bond buying from AUD5 billion to AUD4 billion per week in September. At the August meeting, the board said that given the change in circumstances around Delta, they would re-consider tapering at the next meeting. From a technical point the AUD/USD pair is currently trading at 0.7451. We continue to expect support to hold on moves approaching 0.7330 while now any upward push will likely meet resistance around 0.7480.

Key Movers

Friday’s US August Nonfarm Payrolls report came in quite mixed as the country added just 235K new jobs in the month vs the 750K expected. The unemployment rate contracted to 5.2% as expected, while the participation rate remained unchanged at 61.7%. The spread of the Delta variant in the US is the obvious culprit, with sectors such as leisure and hospitality, where the risks of infection are greater, seeing big slowdowns in hiring. The poor figures fuelled further ongoing speculation that the US Central Bank will have to maintain its ultra-loose monetary policy for longer to the detriment of the US dollar. On Monday we are expecting a quiet session ahead with the US market closed for the Labor Day holiday. The US will not release first-tier data and has quite a light macro-week. The focus will be on employment-related data in the form of weekly unemployment claims and inflation figures, as the country will release the August Producer Price Index, expected to decline to 7.3% YoY.

Expected Ranges

  • AUD/USD: 0.7350 - 0.7550 ▲
  • AUD/EUR: 0.6150 - 0.6350 ▲
  • GBP/AUD: 1.8500 - 1.8700 ▼
  • AUD/NZD: 1.0300 - 1.0500 ▲
  • AUD/CAD: 0.9230 - 0.9430 ▼