Daily Currency Update
AUD - Australian DollarThe Australian dollar extended Monday’s rebound yesterday, pushing through 0.7250 as investors continued to support commodity markets and risk assets. Last week's risk off agenda has flipped amid expectations the Fed will refrain from tapering bond purchases and normalising monetary policy in the face of the delta variant, while China again reported low levels of community transmission with just 1 suspected case recorded. China’s ability to wrest control of this latest delta outbreak has fostered hopes the world’s second-largest economy will enjoy a swift recovery. Added Central Bank support and early signs of increased domestic activity have helped reignite demand for key commodities. Oil extended its recovery, clearing $71 a barrel, while iron ore advanced a further 2%, marking a 15% rebound off lows hit last week. The AUD outperformed most majors, up a further half a percent overnight, touching intraday highs at 0.7270. While risks remain skewed to the downside, there is scope to suggest renewed demand for risk assets amid improving market sentiment could help drive the AUD back toward 0.73 - 0.74 US cents. With little of note on this week’s macroeconomic ticket, we continue to monitor global risk trends and forces for direction.
Key Movers
Commodity currencies outperformed their major counterparts on Tuesday, advancing against the USD and key crosses as other major units showed little to excite investors. The yen tracked marginally higher against the USD, while the GBP and EUR enjoyed modest gains, touching 1.3745 and 1.1765 respectively. The dollar index moved lower, giving up two tenths of a percent, and remains vulnerable to a further correction if markets sustain a shift toward positive sentiment. Having latched onto positive Covid news in China, there is a renewed optimism the worst may be behind us and a second global economic rebuild can begin. That said, the delta variant continues to rip through countries and areas with low vaccination rates, meaning lockdowns and reduced economic activity are likely to remain a drag on growth through the rest of 2021 and into 2022. We maintain our view that risks remain broadly skewed to the downside through the near term as shifting sentiments steer direction.
Expected Ranges
- AUD/USD: 0.7120 - 0.7320 ▲
- AUD/EUR: 0.6120 - 0.6220 ▲
- GBP/AUD: 1.8780 - 1.9120 ▼
- AUD/NZD: 1.0380 - 1.0520 ▼
- AUD/CAD: 0.9090 - 0.9220 ▲