AUD range bound amid quiet start to the week

Daily Currency Update

The AUD offered little to excite investors through trade on Monday, maintaining a narrow range and bouncing between 0.7150 and 0.7205. With little headline data available to drive direction investors focus remained with broader risk flows choosing to chase positive sentiment and ignore negative developments. Victoria continues to see daily case numbers trend in the right direction while the rest of the country appears to be in control of outbreaks, containing wider community transmission for now. With lockdown restrictions seemingly stemming the spread of infection through Victoria there is hope community transmission will be back to zero before the end of the year, leaving the door open for a renewed economic rebound.
Positive sentiment continues to control direction, allowing the AUD to hold onto gains above 0.70 US cents. Having touched highs above 0.7250 the dollar appears range bound between 0.7130 and 0.7250 seeking that next catalyst to drive it higher. While the July rally has stalled there is ample scope for the AUD to trend higher into the end of the year with downward pressure on the USD still in play. We expect the worlds base currency will come under renewed selling pressure in the months ahead opening the door for a run toward 0.73 and 0.74. Of course, there are risks to this outlook as case numbers in Europe continue to rise. Alarmingly new infections in Germany, France and Italy have spiked in recent weeks. Should conditions worsen and targeted restrictions fail to contain the spread we may see a second lockdown period stymie the economic recovery.