Home Daily Commentaries Aussie dollar trades below US$0.67

Aussie dollar trades below US$0.67

Daily Currency Update

The Australian dollar is slightly weaker this morning when valued against the Greenback. The Aussie asset has dropped below the crucial support of 0.6700 in the early New York session. Last week the Aussie dollar slipped back into the 0.6700 handle after a short-lived rally sparked by improving risk sentiment on the back of a better-than-expected print in China’s Caixin Services Purchasing Managers’ Index (PMI) for December. The Aussie has closed in the red for five consecutive trading days, declining nearly 2.5% from late December’s peak near 0.6870. The AUD/USD’s downturn sets the pair up for a fresh bearish challenge of the 0.6600 handle, though bidders could look for a bullish bounce from the topside crossover of the 50-day and 200-day SMAs just below 0.6600. Looking ahead this week on the data front investors will focus on monthly Retail Sales for November, which will be published on Tuesday. As per the estimates, the consumer spending grew by 1.2% after contracting 0.2% in October. This may allow Reserve Bank of Australia (RBA) policymakers to stay with the argument of keeping interest rates elevated for longer.

Key Movers

The US dollar represented by the dollar Index, is currently trading just above 102.40 with slight losses due to the markets adjusting dovish bets post the release of December’s Nonfarm Payrolls (NFP) and the ISM PMIs. On the labor front, December's Nonfarm Payrolls report outperformed expectations with the creation of 216,000 jobs, significantly higher than the consensus estimate of 170,000 and the previous month's 173,000 jobs. Average Hourly Earnings increased by 0.4% month-on-month, exceeding the forecasted 0.3% and mirroring the previous month's growth rate, while the Unemployment Rate remained unchanged at 3.7%, slightly better than the anticipated 3.8%. Altogether, these events suggest a mixed economic outlook with a slowdown in the services sector potentially balanced by a robust labor market and wage growth. The ISM Services PMI recorded a figure of 50.6, falling short of the expected 52.6 and marking a decline from the previous month's 52.7.

From indications in the last 2023 Federal Reserve meeting, a dovish stance was apparent. The Fed expressed comfort with cooling inflation and projected no rate hikes until 2024, suggesting 75 bps of easing. As for now, market predictions hint towards a rate cut in March followed by another in May, and such a position signals a bearish climate for the US dollar, as lower interest rates might drive liquid capital to higher yield markets. As for now the odds of a cut in March have risen to 70%, and the probabilities of an additional cut in May are still high. Looking ahead this week in the US and all eyes will be on the US Consumer Price Index (CPI) which may provide further guidance to investors regarding the next Fed decisions.

Expected Ranges

  • AUD/USD: 0.6600 - 0.6800 ▼
  • AUD/EUR: 0.6000 - 0.6200 ▼
  • GBP/AUD: 1.8700 - 1.8900 ▲
  • AUD/NZD: 1.0550 - 1.0750 ▼
  • AUD/CAD: 0.8800 - 0.9000 ▲