Australian dollar range bound as RBA offers little to shift narrative

Daily Currency Update

AUD - Australian Dollar

The Australian dollar maintained a narrow trading band through Tuesday, bouncing between 0.7250 and 0.73 US cents. Markets largely ignored the RBA policy update, as the bank opted to maintain the current program of stimulus while sticking to script when discussing future policy change. Policymakers offered a relatively optimistic assessment for a post lock down economy yet chose to maintain the current QE program into February 2022 while clinging to a dovish rates rubric. With little expectation rates will change before 2024 and further tapering of bond purchases delayed into the new year, we anticipate little price action around RBA policy updates through the rest of 2021. Having drifted toward intraday lows at 0.7250 late in the domestic session, the AUD climbed steadily overnight, briefly testing 0.73 US cents. A sell off across safe haven currencies helped the AUD recoup the earlier downturn, yet the commodity driven currency still struggles to extend beyond resistance. Markets and investors continue to be torn between competing forces, unable to commit to a complete risk off shift given long held hopes of a rebound in global growth through 2022 yet hamstrung by near term headwinds and ongoing pandemic roadblocks. We expect the AUD will continue to struggle on moves beyond 0.73/0.74 US cents. With risks still skewed to the downside, the AUD needs to hold above the August low if it is to maintain the current handle through the weeks ahead.