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Aussie finds support on mixed US data

BY SHAMEEM MUSA

Having traded either side of the 76 US Cents mark during the back end of last week, topside moves have been well and truly contained for the Australian dollar after figures on Friday showed the US economy added an impressive 222,000 new jobs last  month. Whilst domestic macro events last week remained supportive of a firmer AUD, the tide has turned firmly turned in favour of the Greenback following further signs of strength within the world’s largest labour market. Opening weaker this morning at a rate of 0.7597 inflation numbers from China today remain the highlight ahead of an otherwise quieter looking start to the new week. 

On this day in 1967 New Zealand converted over from using pounds and pence marking today the anniversary of the introduction of decimal currency. 50 years ago, the 1, 2, 5, 10, 20 and 50 cent coins were introduced along with $1, $2, $5, $10, $20 and $100 banknotes. The Kiwi Dollar traded within a tight range on Friday against the US Dollar ending the session around 0.7280. A fairly quiet week ahead on the local data front with the only releases scheduled monthly Food Price Index on Thursday and the Business NZ Manufacturing Index on Friday. The NZD/USD pair is currently trading at 0.7274. We now expect support to hold on moves approaching 0.7259 while any upward push will likely meet resistance around 0.7347.

The Great British Pound was sold down on Friday evening as a comprehensive set of data was released in the UK. Cable traded sideways just below the 1.30 handle heading into the European session before the release of poor Manufacturing production figures for the month of June slipping 0.2%. Sterling declined to 1.2915 following further downgrades in Industrial production and trade balance. The Trade deficit widened by more than suggested forecasts predicted to 11.9bn in May and should further economic downgrades continue in the UK, market expectations of any tightening of monetary policy could start to be pushed back. A strong United States non-farm payroll number pushed the falling cable to an eventual low of 1.2861, and opens this morning at 1.2880 against the US Dollar.

The Euro continues to find support following last week’s ECB minutes where they signalled that further policy tightening is to be expected as the macroeconomic conditions improve. However, there were concerns regarding how its communications could impact markets as any perception that it was moving away from stimulus policy could shake financial markets. The minutes also emphasised that low inflation and weak wages may last longer than expected, therefore, the recovery of wages as the labour market improves may be softer. The Euro moved between a low of 1.1379 and a high of 1.1440 against the Greenback. Meanwhile, out of the US on Friday we saw a mixed bag of US Jobs data released, June payroll employment growth rose to 222k beating expectations of 179k. However, surprisingly there were more people looking for work with the unemployment rate increasing to 4.4% last month from 4.3% in May. Average hourly earnings were up a shade lifting the year-on-year wage increase to 2.5% from 2.4% in May, indicating there is still some slack remaining in the labour market.