Home Daily Commentaries Aussie dollar trades below 66 US cents

Aussie dollar trades below 66 US cents

Daily Currency Update

The Australian dollar is weaker this morning when valued against the Greenback.  The Australian dollar dropped below 66 US cents, the most since March, in US and European trade after the Reserve Bank not only wrong-footed some economists but also currency traders by keeping the cash rate at 4.1 per cent for a second month. Consensus was split heading into the RBA’s board meeting on Tuesday, with traders pricing just a 24 per cent chance of an interest rate rise, while 20 out of 36 economists predicted the central bank would lift rates for the 13th time this cycle. Traders will further take cues from the broader risk sentiment to grab short-term opportunities around the risk-sensitive Aussie. The focus, however, remains glued to the release of the crucial US monthly employment details, popularly known as the NFP report on Friday. The AUD/USD pair is trading at 0.6532 at time of writing.

On the local data front, today the Australian Bureau of Statistics will release the latest trade balance figures.  Export demand and currency demand are directly linked because foreigners must buy the domestic currency to pay for the nation's exports. Export demand also impacts production and prices at domestic manufacturers. A positive number indicates that more goods and services were exported than imported. Tomorrow, the Reserve Bank of Australia will hand down its latest RBA Monetary Policy Statement which provides valuable insight into the bank's view of economic conditions and inflation - the key factors that will shape the future of monetary policy and influence their interest rate decisions.

Key Movers

The US dollar strengthened overnight against its major counterparts after the release of US private payroll data showed a larger-than-expected expansion of the workforce in July. Data from the US’s largest payroll processor ADP showed an unexpected rise of 324K jobs in July versus the 189K predicted. The data reinforces the view that the US labour market is rock solid and inflation is likely to remain stubbornly high. The Federal Reserve is more likely to maintain interest rates higher for longer if more people are earning, and higher interest rates are positive for the US Dollar as they attract greater foreign capital inflows.  The wages components of the ADP report were friendlier, with workers who stayed in their jobs seeing a 6.2% pay increase, the weakest since November 2021 and for those who changed jobs the median pay rise was 10.2%, the weakest in two years. Fitch downgraded the U.S. credit rating due to fiscal concerns, a deterioration in US governance, as well as political polarisation reflected partly by the Jan. 6 insurrection, Richard Francis, a senior director at Fitch Ratings, told Reuters on Wednesday. In a move that took investors by surprise, Fitch downgraded the United States to AA+ from AAA on Tuesday, citing fiscal deterioration over the next three years and repeated down-to-the-wire debt ceiling negotiations that threaten the government’s ability to pay its bills.

Expected Ranges

  • AUD/USD: 0.6430 - 0.6630 ▼
  • AUD/EUR: 0.5870 - 0.6070 ▼
  • GBP/AUD: 1.9300 - 1.9500 ▲
  • AUD/NZD: 1.0640 - 1.0840 ▲
  • AUD/CAD: 0.8620 - 0.8820 ▼