US equities fell for a fifth consecutive day, amid ongoing concerns about valuations and economic growth. The S&P500 fell 0.8%, and the defensive US dollar rose. Bond yields also rose, helped by PPI data. US 2yr treasury yields fell from 0.22% to 0.21%, while the 10yr yield rose from 1.31% to 1.35%. Commodities, Brent crude oil futures rose 2.0% to $73, copper rose 3.8%, gold fell 0.4%, and iron ore fell 1.1% to $128 – a nine-month low.
Overnight Currency Range
AUD/USD 0.7348 0.7408
EUR/USD 1.1809 1.1851
GBP/USD 1.3827 1.3888
USD/JPY 109.70 109.99
NZD/USD 0.7091 0.7157
USD/CAD 1.2582 1.2695
USD/CNH 6.4261 6.4549
AUD/JPY 80.71 81.42
AUD/NZD 1.0333 1.0381
AUD/USD was ending Friday offered, losing nearly 0.2% after falling from a high of 0.7409 and reaching a low of 0.7348. The markets were soured at the end of the week as the latest COVID-19 wave fuelled growth worries while August US producer prices rose more than expected.
AUD/USD key events this week
Meanwhile, the market's focus will shift to US Consumer Price Index, 14 Sep, in the build-up to the September Federal Open Market Committee meeting, 21-22 Sep, and Aussie Employment, 16 Aug.
AUD/USD developing themes
The greenback has continued to attract a safe-haven bid as markets look again with some concern over the coronavirus Delta-variant spread that looks likely to hinder the global economic recovery. At the same time, the potential combination of monetary tightening has moved to the fore.
The Reserve Bank of Australia delivered a dovish taper announcement last week, extending its no-tapering horizon until Feb 2022 which is a weight on the currency currently. The RBA has cast a cautious tone with regards to the fluid Delta coronavirus variant variable and the lockdown data is yet to be seen for the third quarter. This leaves AUD vulnerable.
On the flip side, there are some positives that could come from improved Sino/US relations that might be expected the downside in USD/CNH and transpire into support for AUD as a consequence. The US president Joe Biden and spoke with China’s President Xi over the phone for the first time since February. CNY has been supported on the news which could be the start of a bigger move in USD/CNY, away from the 6.50 level, which normally causes a positive spill over effect for APAC and EM-FX.
The price is being supported at the 61.8% ratio. So long as this area holds, or at least support from Aug 30 business near 0.7320, then there will be prospects of an upside continuation. A break of the 0.7320 level, on the other hand, will be significantly bearish for the days ahead.
Event Risk Data Today
Japan: August PPI
New Zealand: While buyer interest remains strong, August REINZ house sales are likely to be down sharply following the return to COVID-19 lockdown conditions midway through August. The price effect is expected to be muted. Markets are forecasting a 0.2% gain for the August food price index with the gains spread across categories. Finally, September ANZ business confidence will provide a first gauge of business confidence since lockdown.
US: August Monthly Budget Statement