The Aussie dollar continues to fall on a broadly stronger greenback
Monday 4 July, 2022
Daily Currency UpdateOn Friday the Australian dollar fell to a fresh year-to-date low of 0.6777 on the back of weak US manufacturing activity in June which added to investors’ global growth fears. The Aussie dollar closed the week at 0.6821 with substantial losses of around 2%. Overall for the second quarter, the Aussie dollar weakened against the greenback slipping around 9%. The AUD/USD pair now approaches the July Reserve Bank of Australia (RBA) meeting with mostly headwinds. A significantly weakened link between domestic monetary policy dynamics and AUD/USD suggests that a rebound towards the 0.70 mark is unlikely to materialise soon. On the data front on Friday China’s Caixin Manufacturing PMI rose to 51.7 for June versus 50.1 expected and 48.1 prior. Looking ahead this week and today we will see the release of both ANZ Job Advertisements and Building Approvals. On Tuesday all eyes will be on the Reserve Bank of Australia (RBA) meeting which forecasts a 50 bps hike taking the official cash rate to 1.35%. On Thursday we will see the release of the local Trade Balance. From a technical perspective, the AUD/USD pair is currently trading at 0.6812. We continue to expect support to hold on to moves approaching 0.6796 while now any upward push will likely meet resistance around 0.6864.
Key MoversOn Friday's session in the US, we saw the release of the ISM Manufacturing survey, with the index falling from 56.1 to 53, its lowest level since mid-2020. The key New Orders sub-index fell into contractionary territory (49.2 from 55.1) while the Employment index fell further below 50, suggesting manufacturers are pulling back on hiring. Above 50.0 indicates industry expansion, and below indicates contraction. The weaker-than-expected ISM survey follows on from disappointing US consumer confidence and consumer spending data last week which fuelled concerns about growing US recession risk. US equities rebounded on Friday, the S&P500 increasing 1.1% and the NASDAQ managing a 0.9% rally. Even so, equities were lower on the week, by 2.2% on the S&P and 4.1% on the NASDAQ, consistent with the deteriorating growth signals coming from other asset classes. Looking ahead this week and on Monday US banks will be closed in observance of Independence Day. On Thursday we will see the release of the Federal Open Market Committee (FOMC) Meeting Minutes which provides a detailed record of the FOMC's most recent meeting, providing in-depth insights into the economic and financial conditions that influenced their vote on where to set interest rates. Finally, on Friday all will be on the nonfarm payrolls report, where the market is looking for another robust 273k monthly jobs print and for the unemployment rate to hold steady at an ultra-low 3.6%.
- AUD/USD: 0.6700 - 0.6900 ▼
- AUD/EUR: 0.6430 - 0.6630 ▼
- GBP/AUD: 1.7650 - 1.7850 ▲
- AUD/NZD: 1.0850 - 1.1050 ▼
- AUD/CAD: 0.8650 - 0.8850 ▼