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Aussie falls 0.2% after mixed local labour report

AUD - Australian Dollar

The Australian Dollar again came under intraday selling pressure yesterday after a lacklustre local jobs report soured market sentiment. Opening this morning just above key support at 0.6913, the Aussie finds itself on the end of another disappointing unemployment rate which hasn't helped recession concerns down under. Truthfully, it wasn't all bad, the unemployment rate was steady at 5.2% and more jobs were added than was expected. Nevertheless, the market had expected a slight down tick in the unemployment rate to 5.1% and the new jobs created proved to be less desirable part-time positions. Muddying the issue further was the possibility that the rise in part time roles may have been facilitated by the temporary hiring for the election. On the upside however was an increase in the participation rate from 65.9% to 66% which did temper some of the falls.

On a broader level the unemployment rate has caused markets to price in expectations of a 25bp rate cut in July, seeing the expectation move from 55% to 76%. Australian 3-year government bond yields also fell significantly, falling below 1% for the first time on record. Overall, the Aussie reflected these expectations with a 0.2% drop to today’s open.

To close out the week the Aussie now turns to external releases for direction with the worlds’ two largest economies set to report on May retail sales. With global growth and trade war concerns continuing to destabilise the market, the reports will be of key interest. The Greenback has already come under pressure after the Federal Reserve indicated it may look to cut rates in the near future. Any further signs of a slowing US economy could potentially impact the Fed's rhetoric and in turn the US Dollar.

Key Movers

Markets have remained in a holding pattern ahead of some key events over the coming few weeks, specifically, the FOMC meeting and the G20 Summit. Amidst this context there wasn’t too many large movers besides the Australia Dollar which fell 0.2% after a disappointing unemployment rate was released. Otherwise, it was a mostly subdued with little activity in currency markets.

The Great British Pound did have some small movements as the first round of voting for the Conservative party leadership kicked off. Interestingly, Boris Johnson received more votes from his colleagues than the next three candidates combined and now holds a commanding position. Betting agencies have now priced Boris Johnson, an arch-brexiteer, as an 80% favourite to win the Prime Minister-ship. Ultimately however, the Sterling was little changed on the news.

The United States Dollar also continued to trade within a tight range despite some movements in related markets. Oil was the biggest mover when prices spiked after attacks on oil tankers in the Gulf of Oman. US Treasury yields have also continued to be whittled lower on the front end of the curve despite very little news to digest. Nevertheless, market expectations of Fed cuts continue to undermine the strength of the Greenback.

Expected Ranges

AUD/CAD: 0.9181 - 0.9246 ▼

AUD/EUR: 0.6101 - 0.6162 ▼

GBP/AUD: 1.8292 - 1.8364 ▲

AUD/NZD: 1.0503 - 1.0572 ▼

AUD/USD: 0.6878 - 0.6949 ▼