Home Daily Commentaries AUD struggles continue as attention turns to key US employment data

AUD struggles continue as attention turns to key US employment data

Daily Currency Update

The Australian dollar struggles continued through trade on Thursday, marking a fresh 2-month low before finding support. With markets continuing to pare back expectations for peak interest rates, China showing ongoing signs of economic instability, and the Fed looking increasingly likely to cushion the landing of the US economy price action, demand for the AUD has cratered this week. After eyeing a break above US$0.69 on July 13, the AUD has since tracked in one direction, giving up ground to the dollar and major counterparts and marking new H2 lows at US$0.6514. Having found support, the AUD did edge higher through the overnight session, clambering back above US$0.6550.

Our attentions turn now to the RBA statement on monetary policy. While the report contains a full and updated list of RBA forecasts we expect it will have little market impact given policy makers have already provided a detailed agenda update on Tuesday. Instead we expect the AUD will remain largely range bound leading into US non-farm payroll and employment data. With market expectations for a softened economic downturn elevated, another robust print will likely underpin the narrative, heaping more pressure on the AUD, while a surprise downturn in labour market activity could offer the AUD a much-needed reprieve leading into the weekly close.

Key Movers

Price action across major currencies has been largely well contained as markets pare position leading into tonight’s all-important Non-Farm payroll print. There was little reaction to the Bank of England’s decision to raise its policy rate by 25 basis points. Markets had priced the move, along with expectations for further tightening as policy makers work to bring inflation back toward target and 2%. While the pound rallied following the MPC announcement, it succeeded only in recovering losses suffered earlier in the day and opens this morning flat. With the euro tracking between 1.0915 and 1.0960, the Japanese yen was the day’s top performer rebuking losses suffered in the wake of the BoJ bond buying intervention and forcing the USD back below 143 and 142.50. With the USD DXY index largely unchanged, our attentions turn now to tonight's US employment report. We anticipate unemployment will remain stable near 3.6% as strong employment growth continues to underpin a robust labour market. With wage inflation expected to ease, the Fed expectations the Fed can cushion a softer than anticipated economic landing could help drive the USD higher into the weekly close.

Expected Ranges

  • AUD/USD: 0.6480 - 0.6630 ▲
  • AUD/EUR: 0.5950 - 0.6020 ▲
  • GBP/AUD: 1.9280 - 1.9480 ▼
  • AUD/NZD: 1.0720 - 1.0820 ▲
  • AUD/CAD: 0.8700 - 0.8800 ▲