- A combination of factors prompted some fresh selling around AUD/USD on Thursday.
- COVID-19 jitters, softer Chinese GDP print acted as a headwind for the Australian dollar.
- The risk-off mood benefitted the safe-haven USD and contributed to the intraday selling.
The AUD/USD pair maintained its offered tone through the early North American session and was last seen hovering near the lower end of its daily trading range, around the 0.7440-35 region.
The pair came under some renewed selling pressure on Thursday and erased the previous day's modest gains amid worries about the spread of the highly contagious Delta variant of the coronavirus. The Australian state of Victoria was ordered into a five-day lockdown on Thursday following a spike in COVID-19 infections, which, in turn, was seen as a key factor that acted as a headwind for the AUD/USD pair.
Apart from this, a slowdown in Chinese economic growth further dented exerted some additional pressure on the China-proxy aussie. In fact, China's annualized GDP growth for the second quarter of 2021 stood at 7.9% as against consensus estimates pointing to 8.1% and 18.3% previous. The combination of factors took its toll on the global risk sentiment and further drove flows away from the perceived riskier Australian dollar.
Meanwhile, the risk-off environment – as depicted by a generally weaker tone around the equity markets – underpinned the safe-haven US dollar. The supporting factor, to a larger extent, helped offset the Fed Chair Jerome Powell's dovish testimony on Wednesday, the ongoing decline in the US Treasury bond yields and Thursday's rather unimpressive US macro releases.
Data published by the US Department of Labor (DOL) revealed that there were 360K initial claims for unemployment benefits during the week ending July 10. This was lower than the previous week's upwardly revised reading of 386K. Separately, the NY Fed's Empire State Manufacturing improved sharply to 43 in June from 17.4 previous, while the Philly Fed Manufacturing Index fell more than expected to 21.9 from 30.7 in May.
Next on tap will be the second day of Powell's semi-annual congressional testimony. Powell is unlikely to deviate from his view that the recent rise in inflationary pressures was only temporary and would still likely moderate shortly. This should act as a headwind for the greenback and lend some support to the AUD/USD pair. That said, COVID-19 jitters favours bearish traders and supports prospects for further losses.