• US dollar rises across the board into the London fix.
  • Greenback trims weekly losses late on Friday.
  • AUD/USD back to negative for the week, drops toward 0.7350.

The AUD/USD broke under 0.7365 during the American session and fell to 0.7343, reaching a fresh two-day low. The key driver has been a strong US dollar across the board. The greenback gained momentum into the London fix.

The DXY eared losses and is up by 0.30% at 92.15, even as US yields move further to the downside. The 10-year yield stands at 1.22%, about to test the weekly low. The key economic report of the US was the core PCE deflator, considered a critical inflation number for the Federal Reserve. It rose 0.4% in June, against expectations of a 0.6% increase.

From the Fed to the RBA

After the Fed, now the focus turns to the Reserve Bank of Australia (RBA) that next week will have its monetary policy meeting. “We think policymakers in Sydney (a city that is about to spend the whole month of August in lockdown) will not make any amendment to the current policy stance after the adjustments announced in early July. The jump in inflation to 3.8% in 2Q should be dismissed as transitory, and the Bank will likely wait for more indications from the labour market before reacting on the policy side”, wrote analysts at ING. They add that the recent spread of the Delta Variant is likely another reason “why the RBA should revert from sounding more hawkish or upbeat on the recovery at this meeting.”

The Aussie is about to end the week as the worst performer across the G10 space, hit by monetary policy divergence. AUD/USD failed to hold to gains and on Friday to remain above 0.7400; it is on its way to the fifth consecutive negative weekly result. AUD/NZD heads for the lowest weekly close since November of last year.

Technical levels