Send Payments Weekly Trading Update.

Stay informed with Send Payments' weekly currency update. This concise analysis provides insights into the latest exchange rate trends against the Australian Dollar (AUD), helping you make informed decisions about your international transactions. Each week, our international currency specialist, Ian Cragg and his expert Send Payments team highlight key market movements, economic factors, and forecasts that could impact your financial strategies.

In The News 🌏 Market Conditions and What to look out for this Week 🗓️

AUD: Under Pressure – Commerzbank

• The Australian Dollar (AUD) is under significant pressure, losing about 0.7% against the US Dollar (USD), according to Commerzbank’s FX analyst Volkmar Baur.

• The AUD was affected by lower-than-expected inflation, which has reduced expectations for further rate hikes by the Reserve Bank of Australia (RBA). The RBA are due to announce Australia’s interest rate on Tuesday at 2:30pm, there is no expected change. 

• The AUD's strong reaction also seems tied to ongoing economic weakness in China, Australia’s largest trading partner. Weakness in China, especially in the housing market, could impact Australian exports and thus the currency.

USD Rally

• The USD has been steadily rallying against most major currencies recently, though the catalyst behind the move remains unclear.

• A significant factor appears to be deleveraging from a strengthening Yen, which has impacted other markets.

• As the Bank of Japan (BoJ) decision is now behind us, it will be interesting to see if this correlation with the Yen fades.

AUD/USD & NZD/USD

• Weaker US data has pushed both AUD/USD and NZD/USD higher, indicating a lower USD.

• The Australian Dollar has weakened against major peers following the release of Australia's quarterly inflation figures, which eased pressure on the RBA to raise interest rates again.

GBP/AUD

• The pound-to-Australian dollar exchange rate (GBP/AUD) rose to its highest level in 11 months at 1.9810 after Australia's headline CPI rose as expected by 1.0% quarter-on-quarter in the second quarter.

• Trimmed mean CPI, a core measure of domestic inflation, rose less than expected at 0.8% q/q, reducing market bets on further RBA interest rate hikes and increasing the chances of a rate cut by December.

AUD/JPY

• The AUD/JPY pair sustains a dominant bearish trend, with significant support around 95.30.

• On Friday, the pair recorded substantial losses with a 5% weekly decline after the Bank of Japan surprised investors by increasing interest rates to 0.25%.

Last week 🗞️ Key Takeaways:

AUD Performance

• The Australian Dollar (AUD) became the worst-performing G10 currency on a 1-day view in broad risk-off market sentiment, according to Rabobank’s FX analyst Jane Foley.

• Despite the risk that the RBA could hike interest rates at its August 6 policy meeting, the AUD’s poor performance reflected potential headwinds from continued weakness in the Chinese economy.

• Earlier this month, AUD/USD rallied as the USD weakened in response to heightened expectations of a September Fed rate cut, though most of these gains have since been wiped out.

• Recently, the AUD was weighed down by fears stemming from Chinese growth concerns and a cut in the Chinese interest rate.

• Rabobank continued to target AUD/NZD at 1.12 in the coming weeks.

Impact of PBoC's Actions

• The Australian Dollar extended losses after the PBoC unexpectedly cut the one-year medium-term lending facility (MLF) rate by 20 basis points.

• - The MLF cut, the biggest since April 2020, followed Monday's cuts in several benchmark rates.

• - China’s off-cycle monetary policy easing could counter-intuitively hurt investor sentiment.

• - Ewen Chew, a Reuters market analyst, stated that the move aimed to bolster the Chinese economy, which should be supportive of the Aussie Dollar. However, surprise moves could raise more questions than they answered.

AUD/USD

- US PCE inflation increased by 2.5% YoY in June, underscoring an improving inflation environment.

- The RBA’s hawkish stance might support the Aussie as inflation remained high.

- Rising bets that the US Federal Reserve (Fed) would begin cutting interest rates in September weighed on the US dollar (USD).

- Market participants were set to monitor Australian Retail Sales on Tuesday.

- On Wednesday, the Australian Consumer Price Index (CPI) and Fed Interest Rate Decision were in the spotlight.

AUD/JPY

- The short-term bearish trend continued, despite minor gains, as the pair lost more than 7% since June.

- The overall control of sellers remained, as the pair closed on a 4.30% losing week, solidifying the bearish outlook.

- The daily Relative Strength Index (RSI) increased from its previous levels, reaching 23, hinting at a possible easing in the bearish momentum, which might support the AUD in the short term.

Things to look out for this week; 

• Monday 5 August

  Bank holiday in NSW & ACT.

• Tuesday 6 August

  🇺🇸 ISM Services PMI - USD 

  🇦🇺 Cash Rate - AUD

  🇦🇺 RBA Monetary Policy Statement - AUD

  🇦🇺 RBA Rate Statement - AUD

• Wednesday 7 August

  🇳🇿 Employment Change q/q - NZD 

  🇳🇿 Unemployment Rate - NZD 

• Thursday 8 August

  🇦🇺 RBA Gov Bullock Speaks - AUD

  🇳🇿 Inflation Expectations q/q - NZD 

  🇺🇸 Unemployment Claims - USD 

• Friday 9 August

  🇨🇦 Employment Change - CAD

  🇨🇦 Unemployment Rate - CAD

AUD-USD 🇺🇸

Rates continue to drop, currently sitting at 0.6492.

AUD-GBP 🇬🇧

Sitting 0.5078 the AUD - GBP has continued it’s bandwidth since late July.

AUD-NZD 🇳🇿

Rates have seen a 2.18% decline since last week at 1.0909.

AUD-EUR 🇪🇺

AUD to the EUR has continued a decline since mid last month at 0.5950.

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