Key takeaways:
-
Downbeat economic data dents AUD
-
Dovish RBA weighs on the ‘Aussie’
-
AUD monthly lows: £0.50, $0.63, €0.58, NZ$1.07, CA$0.86
-
AUD monthly highs: £0.52, $0.67, €0.61, NZ$1.08, CA$0.88
The Australian dollar began the month on the defensive, after the Reserve Bank of Australia (RBA) opted to leave interest rates on hold again. Although these losses were tempered by hawkish rhetoric from RBA Governor Philip Lowe.
Subsequent data releases proved underwhelming to AUD investors. Domestic retail sales, July’s service sector index and trade data all disappointed, pushing AUD to multi-year lows.
Dovish minutes from the RBA’s August meeting put further pressure on the ‘Aussie’, which was compounded by softer-than-expected wage growth.
At the end of the month, inflation cooled sharply, which dented RBA rate hike bets.
At the start of September, the RBA elected to keep interest rates held at 4.1% again. While Governor Lowe kept the door open for further rate hikes, he also stated that ‘inflation has passed it’s peak’.
Looking ahead through September, some notable domestic data could infuse volatility into the Australian Dollar.
Australia’s second quarter GDP data is forecast to report an acceleration of domestic growth. This could boost AUD rates as it would indicate room for further tightening.
This is then followed by the latest domestic trade data. Australia’s trade surplus is expected to have shrunk, falling from AU$11.321bn to AU$10bn. If this prints as forecast, AUD exchange rates may weaken.
The RBA are set to publish their latest meeting minutes in mid-September. Following the recent pause, these minutes could dent the Australian dollar if they reaffirm the RBA’s dovish stance.
Later in the month, August’s private sector indexes are due to print. If growth in the manufacturing and service sectors recovers, the ‘Aussie’ could strengthen.
