AUD unable to hold gains won following stronger labour data
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Daily Currency Update
The Australian dollar is little changed from this time yesterday, unable to hold onto gains won following a stronger than expected domestic labour market print. Employment data showed a larger number of jobs were added to the economy in November, while the unemployment rate fell back below 4% to 3.9%. The stronger print was significantly better than the market anticipated and forced investors to unwind calls for the RBA to lower rates as early as February next year. Australian rates rose following the data release and the AUD jumped back above US$0.64 marking session highs just shy of US$0.6430. It was however unable to consolidate the upward break and unwound gains through the overnight session sliding back below US$0.6380. It found little support in the promise of fiscal support from China officials, as few details were offered in the statements that followed China’s two-day economic conference.The AUD remains out of favour and our attentions turn now to commentary from RBA Assistant Governor Sarah Hunter for any guidance on future monetary policy plans. The offshore ticket looks relatively quiet with UK GDP and inflation expectations headlining the ticket.
Key Movers
There is plenty to digest this morning, but we will lead with the euro and its break toward 1.0450 following the ECB December policy meeting. Policy makers elected to cut rates by 25 basis points, bringing the underlying deposit rate to 3%, while the accompanying rate statement was adjusted, removing any concession to restrictive policy moving forward. Instead, policy makers shifted to a data dependent view, while considering the possibility of a 50-point rate cut. With growth and inflation forecasts revised downward, the market set about pricing in a further 125 points of cuts through 2025. In contrast, markets are pricing fewer cuts from the Fed. Despite softer than expected leading inflation indicators, recent US macro sets have proved remarkably resilient forcing investors to slow their expectations for monetary policy easing through 2025. While the euro gave up ground, it was not the worst performing major. The Swiss franc led losses, giving up near 1% after the Swiss National Bank elected to issue a 50 point rate cut, 25 points over and above the quarter point expected by the market.Our attentions turn now to UK GDP numbers and inflation expectations, while German business forecasts, Japan’s Tankan survey, NZ manufacturing PMI’s and migration data round out the macro ticket.
Expected Ranges
- AUD/USD: 0.6300 - 0.6450 ▼
- AUD/EUR: 0.6020 - 0.6120 ▲
- GBP/AUD: 1.9700 - 2.0100 ▼
- AUD/NZD: 1.1000 - 1.1100 ▲
- AUD/CAD: 0.9000 - 0.9100 ▲