Daily Currency Update

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Stronger employment data not enough to spark break outside ranges

AUD - Australian Dollar

The Australian dollar again offered little to excite investors through trade on Thursday, failing to break outside recent ranges and continuing to bounce between 0.7730 and 0.7790 despite improved labour market conditions. Employment data showed employment levels are returning to near pre-pandemic levels, with the unemployment rate falling below 6.5% to 6.4% as another 30,000 jobs were added to the economy. The outlook continues to improve with most industries now reporting almost full employment, with job losses now targeted to those worst hit by the pandemic, namely tourism and entertainment. As the vaccine roll-out begins this month, there is hope forward indicators will show further growth moving into Q2, easing pressure on the RBA to maintain long run QE programs.

With little of note on the domestic docket our attentions turn to a raft of European and US PMI data. Markets are pricing in some slippage through February as lockdowns and frigid weather temper economic activity. We are keenly attuned to any divergence in economic performance; softness across European data sets could force the single currency back toward 1.20 and allow the AUD to test resistance at 0.6450.

Key Movers

Volatility across currency markets remained subdued through trade on Thursday with little headline newsflow or data points to spark a wholesale shift in direction. The US dollar drifted lower against the euro, yen and pound with the latter extending its upward run toward 3-year highs. Sterling remains a target for investors and analysts, marking fresh highs at 1.3985 overnight. While domestic data shows modest signs of improvement, the end of the Brexit saga and an ambitious schedule of vaccination has fostered hopes for a robust H2 recovery.

The US dollar gave up much of Wednesday’s gains following a slew of mixed macroeconomic data sets, led by softer than anticipated unemployment claims. The number of Americans filing for unemployment last week jumped from 848K to 861K, well above the 775K predicted, and a sign America’s labour market still has a long way to go to recover pandemic fostered losses.

Our attentions turn to a raft of manufacturing and services data across Europe and the US for direction. While we expect volatility will remain muted, a divergence in economic performance could spark euro softness leading into the weekly close.

Expected Ranges

AUD/USD: 0.7720 - 0.7790 ▼

AUD/EUR: 0.6380 - 0.6450 ▼

GBP/AUD: 1.7820 - 1.8180 ▲

AUD/NZD: 1.0720 - 1.0820 ▼

AUD/CAD: 0.9810 - 0.9890 ▲