Softer US activity markers allow AUD to test again test a break above US$0.65
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Daily Currency Update
The Australian dollar crept back toward US$0.65 through trade on Wednesday, buoyed by softer US services and employment data. Having tracked sideways through the domestic session, the AUD touched session highs at US$0.6505, as markets largely ignored the downside miss on domestic GDP data. The AUD then slid back toward US$0.6490 leading into this morning’s open. The AUD found support in a weaker USD after ISM services data printed well short of expectations and ADP employment numbers were way below market estimates. While both aren’t incredibly reliable markers of activity and labour market performance, the scale of the miss (when marked back to expectations) forced markets to take notice, prompting analysts to firm up bets for a Federal Reserve rate cut in September.Having failed to hold onto gains above US$0.65, our attentions now turn to Chinese Caixin Services data, the European Central Bank policy meeting and US unemployment claims as key items headlining the macro ticket.
Key Movers
The US dollar fell against all majors through trade on Thursday, dragging the USD DXY and BBDXY indexes lower as market firm up bets for a Federal Reserve rate cut in September. The ISM Services index fell below 50 from 51.6, well short of expectations for a small uptick in activity. While subindices within the report pointed to stability across the labour market, a sharp fall in new orders and a rise in the prices paid index suggest the cost of President Trump’s tariff agenda is now filtering into the real economy. With ADP’s employment report falling well short of expectations as well, treasury yields fell, dragging the US dollar with them. The euro moved back toward 1.1450 while the pound consolidated a break above 1.3550 while the yen has again pushed the dollar back below 143.Our attentions turn now to the European Central Bank and its monetary policy meeting. We expect policymakers will issue a 25-point cut, lowering rates to 2%. This will mark the 8th cut in this cycle. Our attentions will be keenly attuned to the accompanying statement and commentary for guidance on future policy direction.
Expected Ranges
- AUD/USD: 0.6400 - 0.6530 ▲
- AUD/EUR: 0.5620 - 0.5750 ▼
- GBP/AUD: 2.0700 - 2.1000 ▼
- AUD/NZD: 1.0720 - 1.0820 ▼
- AUD/CAD: 0.8850 - 0.8950 ▲