AUD - Australian Dollar

The Australian dollar tracked sideways through trade on Monday amid an absence of headline data sets and light newsflow. Investors appeared content in sidelining larger bets, instead simply tracking direction within a well defined and narrow trading handle. The AUD bounced between 0.7340 and 0.7375 and showed little signs of breaking back toward last weeks highs above 0.74. We anticipate a period of consolidation interspersed with short run volatility episodes. The AUD remains vulnerable to changes in risk sentiment. The Delta variant continues to disrupt headline growth data and supply chains, extending the timeline of recovery well into 2022, dampening demand for commodity fueled currency. That said, vaccination progress and hopes a global program of immunisation will offer a broader economic re-opening continue to prop up risk assets. We expect the AUD will continue to respond to broader USD moves ahead of Thursday’s unemployment and labour market print. Our attentions today turn to RBA governor Lowe for any insight into the Bank’s view on post lockdown recovery and how the current environment shapes policy moving through Q4. US inflation date is also due. We anticipate a largely muted market reaction as Fed policy direction remains driven by labour market performance and not transitory inflation.

Key Movers

Price action across major currencies was virtually non-existent through trade on Monday with most majors maintaining a narrow 0.1% range when valued against the USD. The GBP bounced between 1.38 and 1.3850, while the Euro tracked between 1.1770 and 1.1815 and the JPY maintained a narrow 30-point handle. With no key macroeconomic releases and light newsflow investors appeared content to ease their way into the new trading week, taking stock and consolidating positions amid a recent surge in risk sentiment volatility. Our attentions today turn to US CPI data. With FOMC attentions squarely affixed to labour market performance we expect the market will largely ignore another uptick. Assuming inflation pressures are contained to pandemic sensitive categories and those most impacted by supply constraints then we anticipate the Fed will maintain its current path to tapering and offer little boost to the USD in the near term. Looking beyond CPI data we are looking to a period of consolidation among major currencies with the USD’s safe haven status supporting it through a period of uncertainty.

Expected Ranges

AUD/USD: 0.7280 - 0.7420 ▲

AUD/EUR: 0.6190 - 0.6270 ▲

GBP/AUD: 1.8680 - 1.8930 ▼

AUD/NZD: 1.0290 - 1.0420 ▲

AUD/CAD: 0.9270 - 0.9350 ▼

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