Australian dollar remains dovish
Daily Currency Update
The Australian dollar is weaker this morning when valued against the greenback, declining in late trade on Friday to close around 0.7350. Last week we saw the AUD/USD reach a mid-week high of 0.7426 but failed to retain the 0.7400 levels. On Friday the Reserve Bank of Australia published the minutes of its latest monetary policy meeting, which repeated that the board remains committed to maintaining financial support and that a rate hike would not be likely until 2024. This is despite rising risks to the local economy amid persistent lockdowns to tame the spread of Covid-19. A return to school and to work was announced on Friday for Greater Sydney residents if New South Wales can hit a total of 6 million doses of Covid-19 vaccinations by August 28. The Aussie dollar still remains vulnerable in the coming week, with global Covid-19 cases still on the rise, threatening isolated lockdowns or various restrictions.On the data front this week on Tuesday we will see the release of Australian NAB’s Business Confidence and NAB´s Business Conditions for the month of July. On Wednesday we will see the release of July’s Westpac Consumer Confidence and Consumer Inflation Expectations. From a technical point of view the risk remains skewed to the downside. The AUD/USD pair is currently trading at 0.7354. We continue to expect support to hold on moves approaching 0.7290 while now any upward push will likely meet resistance around 0.7385.
Key Movers
On Friday the greenback rallied on the back of an upbeat July nonfarm payrolls report. The US added 943K new jobs in July, while the unemployment rate dropped sharply from 5.9% to 5.4% (5.7% expected) and wage growth was stronger than expected, both largely beating the market’s expectations. The participation rate increased to 61.7% while broader measures of the labour market also improved, with the underemployment rate falling 0.6%, to a new post-Covid low of 9.2%.Looking ahead this week and the key release is the US CPI report on Wednesday which is expected to show some moderation in inflation pressures from previous months (although the year-on year rates of both headline and core inflation are expected to remain very high, at 5.3% and 4.3% respectively). The market will also be listening closely to the four Fed officials who are speaking this week, for any guidance on the possible timing for tapering in light of the upside surprise to payrolls.
Expected Ranges
- AUD/USD: 0.7250 - 0.7450 ▼
- AUD/EUR: 0.6150 - 0.6350 ▼
- GBP/AUD: 1.8730 - 1.8930 ▲
- AUD/NZD: 1.0370 - 1.0570 ▲
- AUD/CAD: 0.9100 - 0.9300 ▲