Home Daily Commentaries Softer US payroll data not enough to save near term AUD outlook

Softer US payroll data not enough to save near term AUD outlook

Daily Currency Update

All in all, it was a disastrous week for the Australian Dollar, which bludgeoned into giving up nearly 1.2% and crashing through US$0.66 amid increasing headwinds. Having marked a weekly low of US$0.6516 the AUD seemingly found some support through trade on Thursday, only to give up gains leading into Friday’s all important US non-farm payroll print. With hopes the Fed can nurture a softer than anticipated economic landing, all eyes were on US labour market performance. A softer than expected print prompted an immediate reaction across bond, equity, and FX markets with the USD paring gains, slumping against most all major currencies. The AUD jumped 0.3%, punching back above US$0.66 and marking an overnight high of US$0.6607, before slipping into the weekly close. Unable to hold onto gains above US$0.66 the AUD opened this morning buying US$0.6572.
A bank holiday Monday means there is little noteworthy data on hand to drive direction and our attentions turn to Wednesday’s Chinese CPI update as the first real headline item on the macroeconomic docket. The Chinese Economic slowdown remains a significant headwind capping the AUD upside and another deflationary print will likely exacerbate Yuan weakness and weigh on the AUD.

Key Movers

US non-farm payroll data dominated the docket Friday, prompting ample price action across treasuries, equities and currency markets. A softer than anticipated uptick in headline payroll growth and a downward revision in May and June numbers prompted an immediate correction in US treasuries with 2-year rates slumping some 12 basis points. Equities and bond yields remained under pressure as Growth worries in Europe and China and the downgrade in Fitch’s US credit rating continue to weigh on investors' appetite for risk, and while the DXY index gave up half a percent on the day, the undercurrent of risk aversion helped minimise losses and ensured the USD would close higher on the week.
The Euro pushed back above 1.10 while the Yen enjoyed some relief as US treasury yields retreated. While pushing back above 1.27 the GBP was unable to make any really meaningful gains sliding back below 1.2750 leading into the weekly close.
With investors still pricing in only a 20% chance of a September Fed rate hike our attentions turn this week to Chinese CPI data and US Core PPI numbers. With the promise of stimulus thus far unfulfilled by Chinese officials another deflationary print could well spur further Yuan weakness and exacerbate the recent risk off move.

Expected Ranges

  • AUD/USD: 0.6480 - 0.6630 ▲
  • AUD/EUR: 0.5920 - 0.6020 ▼
  • GBP/AUD: 1.9320 - 1.9520 ▲
  • AUD/NZD: 1.0700 - 1.0820 ▲
  • AUD/CAD: 0.8700 - 0.8820 ▲