Monthly Wrap: AUD – Market turbulence sinks the Australian dollar  

Key takeaways:  

• Global economic concerns weigh on the ‘Aussie’ 
• Easing inflation sinks AUD 
• AUD monthly lows: £0.50, €0.59, $0.63, NZ$1.08, C$0.89 
• AUD monthly highs: £0.52, €0.62, $0.67, NZ$1.14, C$0.92 

The Australian dollar (AUD) retreated through July, before facing further declines at the start of August amid rising geopolitical and economic concerns. 

AUD initially weakened following the publication of the minutes from the Reserve Bank of Australia’s (RBA) latest meeting, in which policymakers struck a largely tepid tone.  

While stronger-than-forecast retail sales served to cushion AUD’s losses, a surprise narrowing of Australia’s trade surplus left the ‘Aussie’ facing headwinds once again. 

Following this, Australia’s latest jobs report was pulled into focus. Unemployment unexpectedly rose to 4.1% in June; however, this was offset by a stronger-than-forecast growth in domestic employment.  

Market sentiment continued to influence AUD movement during this time. Renewed global inflation concerns and shifting Federal Reserve interest rate expectations rocked the ‘Aussie’ as they stoked risk-off flows. 

Driving significant losses for the ‘Aussie’ towards the end of July was Australia’s latest consumer price index. June’s monthly indicator, reported inflation cooled to 3.8%, trimming bets that the RBA might still hike interest rates in the future. 

As we entered August, the Australian dollar was pressured by worrying market selloff as growing concerns of a US recession spooked markets. 

During its August monetary policy meeting, the RBA left rates on hold as expected. However, Governor Michelle Bullock stated that rate cuts were ‘not on the cards’ in the near term, thereby lending AUD support against some of its major rivals.  

Looking to the month ahead, any further hawkish signals from the central bank could lift AUD from recent lows. With an influx of policymakers set to speak in the coming days, any talks of further rate hikes may bolster the ‘Aussie’.  

Elsewhere, global risk dynamics may continue to infuse volatility into AUD, particularly amid the recent market turbulence and Fed rate cut bets.