Home Daily Commentaries Aussie dollar trades below 65 US cents

Aussie dollar trades below 65 US cents

Daily Currency Update

The Australian dollar is slightly weaker this morning when valued against the Greenback. The Australian dollar failed to capitalise on the surprisingly upbeat Caixin Manufacturing PMI for August. The Caixin China General Manufacturing PMI came in at 51 in August, 1.8 points higher than the July reading. It was the third time in four months that Chinese manufacturing conditions expanded, indicating that the sector was improving.

The Australian dollar didn’t strengthen despite being a proxy for Chinese economic prospects trading below 65 US cents.

On the local data front today we will see the release of the Australia and New Zealand Banking Group (ANZ) Job Advertisements for the month. This data tends to have more impact when it's released ahead of the government employment data rather than after. Looking ahead for the rest of the week, all eyes will be on the interest rate decision by the Reserve Bank of Australia (RBA), which will be announced on Tuesday. According to a Reuters poll, RBA Governor Philip Lowe will keep interest rates unchanged at 4.10% but will keep doors open for more hikes.

On Wednesday the Australian Bureau of Statistics will release the quarterly Gross Domestic Product (GDP). Finally, on Thursday we will see the monthly Trade Balance data.

Key Movers

The US dollar strengthened on Friday against its major counterparts after the release of mixed Nonfarm Payroll figures and strong PMI figures. The Nonfarm Payroll report, which measures the employment change in non-agricultural business, showed that the US added 187,000 jobs in August, a tick higher than the 170,000 expected and from the previous downwardly revised 157,000.

On the negative side, Average Hourly Earnings increased, but slower than expected, while the unemployment rate rose to 3.8% in the same month. The ISM manufacturing index rose to 47.6 from 46.4 in August, close to consensus estimates of 47.0. The headline index has been stable at depressed levels during 2023 as the sector is impacted by higher interest rates and a slow economic recovery in China.

In the UK, the GBP slumped late in the New York session versus the Greenback as US Treasury bond yields rose and bolstered the USD, which is set to print its seventh consecutive week printing gains. The GBP/USD hit a daily high of 1.2712 before reversing its course and diving toward the current exchange rate, trading at around 1.2590.

Earlier data in the UK showed that British business activity remained in contractionary territory, dropping for six consecutive months below the 50 threshold, as revealed by the S&P Global/CIPS Manufacturing PMI, coming at 43.0 from 45.3 in July. That makes the case for a Bank of England (BoE) pause on its tightening cycle, but inflation remains close to 7%. Nevertheless, traders foresee a 25 bps rate increase in the upcoming meeting.

Expected Ranges

  • AUD/USD: 0.6330 - 0.6530 ▼
  • AUD/EUR: 0.5860 - 0.6060 ▼
  • GBP/AUD: 1.9370 - 1.9570 ▲
  • AUD/NZD: 1.0700 - 1.0900 ▲
  • AUD/CAD: 0.8640 - 0.8840 ▼