AUD/USD remains under pressure as the Bears take charge
|AUD - Australian Dollar
The Australian dollar remained under pressure throughout trade on Friday, plummeting to a fresh 2021 low at 0.7105 early in the session. Nevertheless, the Aussie did enjoy a small bounce at the close to see it through to the weekend at 0.7138. Despite the small recovery, the Aussie opens this morning at 0.7132, a fall of 0.23% on Friday’s opening price.
It was a week to forget for the Aussie with a near perfect storm of events conspiring to undermine demand for the commodity linked currency. Indeed it was a combination of ‘bad news for the Aussie and safe haven bid for the USD’ that saw the AUD/USD fall to its lowest point since November 2020. On the Australian side of the pair, COVID-19 continued to be the headline act domestically with two-thirds of Australians now finding themselves in some form of lockdown. Treasurer Frydenberg vocalised this effect on the economy by revealing that the Treasury department expects a 2% contraction in this quarter. Investors also assume that ‘normal’ activity won’t resume immediately after the September quarter which may therefore see Australia enter another ‘technical’ recession. Adding further downward pressure was a softening of commodity prices with Iron Ore in particular falling 24.91% for the month. The steep declines were felt across a number of commodities, including Oil and Copper and ultimately undermined demand for the Aussie.
Moving into a new week, the Aussie has little on the economic calendar to digest with attentions to remain on the domestic COVID-19 situation as well as the broader global growth narrative.
Key Movers
The US Dollar Index grew 1.02% this week to open this morning at 93.46. Aided by souring risk sentiment and the subsequent flight to safe havens, the US dollar rallied impressively last week to hit a 9 ½ month high on Friday before retracing slightly ahead of the weekend.
The broader global narrative of a straightforward post-pandemic economic recovery came unstuck last week as China’s Industrial Production and Retail Sales both came in at lower growth rates than in July. With global growth being highly correlated to the Chinese economy, the softer results rang alarm bells across markets which in turn saw a sell-off in commodity prices. The surprise results also saw risk sentiment about-turn and the greenback bid higher as investors sought the US dollar as a safe haven. Adding to US dollar strength was a hint that the Federal Reserve may look to scale back its monetary stimulus later this year. The minutes of the July policy meeting, released last week, showed ‘most’ officials were in favour of beginning tapering monthly asset purchases later this year.
With little of note on todays macroeconomic docket for the greenback, attentions remain on the broader risk-off narrative ahead of GDP figures on Thursday.
Expected Ranges
AUD/CAD: 0.9084 - 0.9194 ▼
AUD/EUR: 0.6049 - 0.6122 ▼
GBP/AUD: 1.8962 - 1.9191 ▲
AUD/NZD: 1.037 - 1.0494 ▼
AUD/USD: 0.7083 - 0.7168 ▼
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