Home Daily Commentaries Aussie dollar falls below 68 US cents

Aussie dollar falls below 68 US cents

Monday 5 September, 2022

Daily Currency Update

The Australian dollar is slightly weaker this morning trading just below 68 US cents on modest USD weakness. The AUD/USD pair attracted some buying on Friday and recovered a part of the previous day's losses, around 0.6770 level, the lowest level since July 18. Last week on the data front July retail sales, somewhat of a lag indicator, were much stronger than forecast last Monday, coming in at 1.3% month-on-month instead of 0.3% anticipated and 0.2% previously. On Tuesday building approvals data revealed a -17.2% crash in July compared to June, way below expectations of -3.0% and -0.7% in the prior month. Higher interest rates appear to be impacting the Australian housing market, with data from Corelogic on Thursday showing the largest monthly depreciation in August for forty years. Sydney, the largest property market, fell 2.6% while prices across the nation fell 1.6% for the month. Looking ahead this week on the data front and economists are forecasting a 50-basis point (bp) hike in the cash rate target by the Reserve Bank of Australia (RBA) at their meeting this Tuesday. However, futures markets are pricing in closer to 40 bp, which would put the cash rate at 2.25%. Prior to the pandemic, the RBA maintained the rate in multiples of 0.25%. It is currently off that schedule at 1.85%. Australia’s trade balance for July is due out on Thursday, but it is unlikely to match June’s astronomical and record-breaking AUD 17.67 billion. Forecasts are still looking for circa AUD 10 billion, a significant contribution to the nation's bottom line. A lower AUD/USD exchange rate adds to the contribution from exports.

Key Movers

US stocks opened higher on Friday after the release of the key August jobs report pre-market did not bring any major surprises. The Dow closed down 338 points, 1.1%, at 31,319, the Nasdaq Composite lost 154 points, 1.3%, to 11,631 and the S&P 500 slipped 42 points, 1.1%, to 3,924. Investors couldn't make a mini-rally, prompted by promising jobs data for August, last more than a half day. The household survey (used to generate the unemployment rate) was quite impressive. It reported employment rising by 442,000. However, the eye-catching thing was the jump in worker participation to 62.4% from 62.1%, with the civilian labour force increasing by 786,000 in August. The highly anticipated non-farm payrolls report showed that the nation added 315,000 jobs in August, slightly above the consensus analyst expectation of 300,000. Unemployment, which was forecast to remain stable at 3.5%, unexpectedly rose to 3.7%. Markets continue to price in a 75 bps rate hike at the September FOMC meeting which takes place on September 20-21.

Expected Ranges

  • AUD/USD: 0.6650 - 0.6850 ▼
  • AUD/EUR: 0.6750 - 0.6950 ▼
  • GBP/AUD: 1.6800 - 1.7000 ▼
  • AUD/NZD: 1.1000 - 1.1200 ▲
  • AUD/CAD: 0.8800 - 0.9000 ▲