Aussie lower as RBA in focus

Daily Currency Update

Friday’s session delivered another daily fall for the Australian dollar as AUD/USD retreated from slightly above 0.7400 to 0.7330 throughout trade. The moved characterized a tough week for the domestic unit, as it failed to capitalize on broad based US weakness in the market. With the USD index touching one-month lows on Friday and finishing 0.7% down for the week, the Australian dollar was down 0.3% on the weekly chart when valued against its US counterpart. As ongoing lockdowns continue to weigh on the currency and with the Queensland government announcing a snap 3-day lockdown on Friday, investors will be closely watching this week's RBA meeting and adjusting their expectations for Q3 GDP.
As we touched on above, the RBA meeting on Tuesday is set to be the key release for the Australian dollar. Analysts are expecting the fallout from the spread of the Delta variant and associated lockdowns to force the central bank to reverse its previous decision to commence the tapering of bond purchases in September. With many economists now expecting the economy to contract in Q3, there has been calls for an increase to the asset purchases to $6b per week compared with the current settings of $5b.
Offshore releases of note this week will be New Zealand labour market data on Wednesday which is expected to show strong demand for workers, a drop in unemployment and rising wages as firms compete with each other for employees. With AUD/NZD falling to 1.0520 on Friday, its lowest level since December, investors will be closely watching the data, as well as Tuesday’s RBA announcement as indicators of future direction for the pair. Rounding out the week, we will see July non-farm payrolls out of the US which are always closely watched. Analysts are expecting another strong gain as the economy re-opens however there has been considerable volatility in the numbers of late.
Heading into today, the Australian and US dollar’s are currently changing hands at 0.7340. Having failed to consolidate above 0.7400 in recent weeks, risks are seemingly skewed to the downside with the Aussie currently being offered very close to a key downside support level at 0.7328.