EUR (1.183) ▼

▪ EUR fell to a 5-month low against the USD in August on the back of the widening monetary policy divergence between the Fed and ECB, fears over the fast-spreading Delta variant's impact on the economy and lower-thanexpected Eurozone economic data readings. To note, the bloc’s currency weakened to a near 10-month low of 1.169 on August 19 as the USD index jumped to above the 93.5 level amid Fed-fuelled USD buying pressure.

▪ The direction of the EUR for this month will be mainly influenced by the FOMC and ECB September monetary policy meeting. A more hawkish surprise by the Fed and ECB's continued ultra-loose policy may likely keep the EUR below the 1.18 threshold. Prior to that, a strong US jobs report could push the greenback higher, potentially depreciating the EUR.

GBP (1.377) ▼

▪ GBP weakened against the USD in August, as COVID- 19 concerns, mixed UK data, and tapering expectations weighed on cable. The sterling was pressured by an upturn of infections in the UK and slowing vaccination rates, even as the dollar was boosted by a flight to safety amid rising global COVID-19 cases.

▪ GBP may continue to depreciate this month, pressured by a stalling vaccination campaign and renewed Brexit concerns, as customs issues concerning the Northern Irish protocol may weigh on investor sentiment. Furthermore, a potentially strong US non-farm payrolls could lead to a higher chance of a Fed taper announcement this month, which would boost the dollar.

AUD (0.733) ▼

▪ AUD depreciated slightly against the USD in August, as regional lockdowns were extended amid persistently high COVID-19 cases, and as vaccination rates remained relatively low. Additionally, the central bank maintained a dovish stance and stated that they could respond to the interruption in economic recovery if needed.

▪ AUD may decline further this month, amid surging COVID-19 cases and likely extensions to lockdown restrictions. This would be exacerbated should the USD be boosted by a strong jobs report or a Fed tapering announcement.

NZD (0.706) ▲

▪ NZD appreciated in August, supported by better risk appetite amid the dovish US Fed, closing slightly higher against the greenback on a MoM level. Earlier, the kiwi was pressured in mid-August mainly due to the COVID- 19 Delta variant outbreak, which brought New Zealand into a full lockdown until August 31 and extended lockdown in Auckland by two weeks.

▪ NZD may further extend its gain in September if it successfully contains the Delta variant outbreak and reopens its economy. Nonetheless, the upside bias would likely be capped due to rising global COVID-19 cases.

Source: Kenanga Research - 1 Sept 2021