AUD/USD rises as risk appetite improves, all eyes on Fed and Aussie jobs data
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Daily Currency Update
The AUD/USD pair advances toward the US$0.6670 mark during the European trading session on Monday, as the Australian dollar (AUD) finds renewed strength amid improved risk appetite, and growing expectations of monetary easing by the U.S. Federal Reserve. The broader appeal for risk-sensitive assets is lending support to the Aussie, helping it outperform its G10 peers despite lingering concerns over China’s economic outlook.Earlier in the Asian session, the pair dipped to an intraday low of US$0.6638, following the release of weaker-than-expected economic data from China, Australia’s largest trading partner. China reported that Industrial Production rose by 5.2% year-over-year in August, missing market expectations of 5.8% and slowing from the 5.7% pace recorded in July. Retail Sales for the same period increased by 3.4%, also falling short of forecasts (3.8%) and slightly down from the previous 3.7%.
The disappointing data raised fresh concerns about the health of China’s recovery and momentarily weighed on the AUD. However, sentiment improved in the European hours as traders shifted focus back to the U.S. policy outlook. Markets are increasingly confident that the Fed could signal the start of a rate-cutting cycle in Wednesday’s policy decision, boosting demand for higher-yielding currencies like the AUD.
Looking ahead, attention now turns to Australia’s August employment report, due on Thursday. Economists expect the Unemployment Rate to remain unchanged at 4.2%, while the economy is projected to have added 21.2K new jobs, slightly below the 24.5K gain recorded in July. A stable labour market reading could reduce pressure on the Reserve Bank of Australia (RBA) to ease policy aggressively in its upcoming meeting, potentially offering further support to the Aussie in the near-term.
Key Movers
The pound (GBP) strengthened during the North American session on Monday, supported by diverging monetary policy expectations between the Bank of England (BoE) and the U.S. Federal Reserve (Fed). The GBP/USD pair trades around 1.3586 at the time of writing, gaining 0.22% on the day, after rebounding from a session low of 1.3548.Market sentiment is increasingly tilted toward a potential interest rate cut by the Fed during its upcoming policy meeting on Wednesday, the first in nine months. In contrast, the BoE is widely expected to hold rates steady as inflationary pressures in the UK remain elevated. This divergence in policy outlooks is offering support to the pound as traders position ahead of a critical week for both economies. In the UK, a heavy economic calendar will play a crucial role in shaping expectations for the BoE’s next moves.
On Tuesday, investors will assess the latest labour market data, followed by the release of August inflation figures on Wednesday. The BoE’s policy decision will cap off the week on Thursday. Inflation remains a key concern for the UK central bank, with the Consumer Price Index (CPI) hovering close to the 4% mark, well above the BoE’s 2% target. Persistent price pressures may reinforce the case for the BoE to maintain a restrictive policy stance, even as growth risks loom.
The pound’s near-term direction will likely hinge on the outcome of these data releases and central bank announcements, with traders closely watching for any signs of policy divergence that could drive volatility in GBP/USD.
Expected Ranges
- AUD/USD: 0.6550 - 0.6750 ▲
- AUD/EUR: 0.5550 - 0.5750 ▲
- GBP/AUD: 2.0350 - 2.0550 ▼
- AUD/NZD: 1.0950 - 1.1150 ▼
- AUD/CAD: 0.9050 - 0.9250 ▲