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Monthly Wrap: AUD - Australian Dollar Buoyed by Hawkish RBA; Economic Confidence Consistently Disappoints

currency-newsMonthly Wrap: AUD - Australian Dollar Buoyed by Hawkish RBA; Economic Confidence Consistently Disappoints
Key takeaways:
  • Australian Dollar under pressure from domestic Covid cases and risk-off sentiment
  • RBA tapering talk gives temporary boost to AUD prospects
  • AUD Monthly lows: £0.53, $0.73, €0.62, NZ$1.04, C$0.92
  • AUD Monthly highs: £0.54, $0.74, €0.63, NZ$1.06, C$0.94
 
The ‘Aussie’ took a definite downturn overnight towards the end of July, as tensions escalated between the US and China. Souring international relations with China posed a threat to Australia’s valuable trading relationship with the country.

Concerns over the spread of coronavirus cases within Australia also weighed upon the Australian Dollar.

AUD investors were unnerved by the extension of lockdown measures as well as the country’s lacklustre vaccine rollout, which former Australian Prime Minister Malcolm Turnbull branded ‘a colossal failure’.

As a result, AUD opened August trading comparatively low already against such currencies as the Pound and the US Dollar.

The Australian Dollar recouped some losses as Australia’s manufacturing PMI was revised up at the start of August and the Reserve Bank of Australia (RBA) decided to stick with original tapering plans.

The exchange rate then continued to fluctuate as positive domestic trade figures were nullified by rising Covid cases and low consumer confidence levels countered a hawkish monetary policy statement from the Reserve Bank of Australia (RBA).

Into this week, the Australian Dollar has sunk lower as Covid worries persist and the US Dollar remains strong – which, as a result of the negative correlation between the two, threatens AUD prospects. An uncertain narrative from the RBA exacerbates the ‘Aussie’s’ difficulties, alongside extended lockdowns across Australia.

Looking ahead, the Australian Dollar could face some pressure going forward amidst a prevalent risk-off mood.

However, the ‘Aussie’ still looks well positioned to rally at the start of next month if the RBA proceeds with its plans to start tapering its stimulus programme.
Philip McHugh

Philip McHugh

Joining the corporate trading desk in 2007, Phil now over sees all of Currencies Direct’s corporate dealing activity. Having gained experience working with hundreds of businesses to optimise international payments processes and execute comprehensive risk management strategies, Phil currently works with a portfolio of corporate clients whilst managing Currencies Direct’s overall market exposure

Phil has FCA approval and has completed the Certificate in International Treasury Management (CertiTM)

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