Home Daily Commentaries AUD fails to hold onto move above US0.65 as attentions turn to China Data and US labour market

AUD fails to hold onto move above US0.65 as attentions turn to China Data and US labour market

Thursday 31 August, 2023

Daily Currency Update

The Australian dollar tested a break above US$0.65 through trade on Wednesday following softer US GDP and labour market data. Markets larger ignored the lower-than-anticipated local CPI print as the goods-heavy nature of this month’s report tends to paint a distorted image of inflation pressures. Instead, markets turned their attention to US data sets. Quarter two GDP data rose at a revised rate of 2.1% lower than most analysts anticipated, while the latest ADP employment report showed the pace of jobs growth slowed to its lowest level in 5 months. With the Fed adopting a data-dependent program the softer-than-expected data added to the ever-increasing likelihood the Fed has reached the end of this tightening cycle. With equities and risk assets finding support the AUD punched through US$0.65 marking intraday highs at US$0.6522 before retracing back toward US$.6480 to close flat on the day.

Our attentions now turn to Chinese PMI data ahead of Friday’s US non-farm payroll print. With labour market momentum slowing, a softer-than-anticipated print could be the catalyst the AUD needs to consolidate a recovery above US$0.65.

Key Movers

The US dollar was weaker against most majors through trade on Wednesday after softer-than-expected GDP and labour market data forced another downward correction in US yields and rate expectations. With the DXY on the back foot, the Euro surged back through 1.09, buoyed by stronger regional inflation data. Bund yields rose as markets priced in a higher likelihood that the ECB will hike rates by 25 basis points next month after German CPI showed prices increased 6.4% year on year to August, while Spanish inflation reached a 3-month high. The GBP climbed back above 1.27, dragged upward by the Euro and weaker dollar while the Yen, emboldened by the weaker US rates backdrop held steady at 146.20.

Our attentions now turn to Chinese PMI’s for August. We expected further decline in both manufacturing and service activity. More Euro area inflation data and Japanese retail sales round out the docket leading into Friday’s all-important US non-farm payroll print.

Expected Ranges

  • AUD/USD: 0.6380 - 0.6520 ▲
  • AUD/EUR: 0.5880 - 0.5980 ▼
  • GBP/AUD: 1.9420 - 1.9720 ▲
  • AUD/NZD: 1.0820 - 1.0920 ▲
  • AUD/CAD: 0.8720 - 0.8820 ▲