AUD falls to December lows on spread of delta variant

Daily Currency Update

AUD - Australian DollarDespite the USD index falling 0.3% overnight, the Australian dollar fell against the worlds reserve currency as the spread of the new Covid variant spooked markets and their outlook for the economic recovery. AUD/USD fell from 0.7460 to 0.7418, representing its lowest level since December 2020. It was a similar story for the NZD, which fell from 0.6985 throughout trade to around 0.6935. With the NZD having a worse session than the AUD, the AUD/NZD cross rate rose from Wednesday’s one-month lows to once again trade above 1.0700. The risk off move overnight has been attributed to investor caution on the back of a possible slowdown in economic growth and the rising spread of the new delta variant. With Japan announcing a state of emergency and infection rates increasing in countries with high vaccination rates, the outlook for a global reopening is dimming. Looking forward to the session ahead, the RBNZ are set to announce bond buying plans for the next week at 12pm. Markets are expecting the pace to be kept at $200m and market action is expected to be muted. There is also some important CPI and PPI data due out of China as well as Canadian employment data later in the session. Given recent moves, AUD/USD supports have been broken with the next level on the downside seen at 0.7400.