Home Daily Commentaries AUD edges higher thanks to weaker US data sets

AUD edges higher thanks to weaker US data sets

Daily Currency Update

The Australian dollar climbed back above 0.69 US cents through trade on Tuesday following a downturn in key US data sets. With little on hand to drive direction through the domestic session, the Aussie dollar tracked sideways, bouncing between 0.6860 and 0.69. The AUD then surged toward intraday highs above 0.6960 as US Services, Manufacturing and housing data all turned lower. Activity across the service sector fell steeply through July, while manufacturing printed below 50 for a second consecutive month. A reading below 50 indicates a contraction in activity and when coupled with a near 13% downturn in new home sales, there is a fear the US economy may not be as resilient as the Fed and FOMC policy makers think. Having touched intraday highs at 0.6963, the AUD opens this morning buying 0.6925 US cents. Our attentions remain with US economic performance and the broader risk narrative, as the market enters a holding pattern ahead of the weekend’s Jackson hole symposium on Monetary Policy.

Key Movers

The US dollar retreated through trade on Tuesday giving up some of last weeks advance, amid a downturn in key macroeconomic indicators. US PMI’s showed further falls across both the services and manufacturing sectors, with manufacturing activity contracting for the second consecutive month and touching its weakest level in over two years. The downturn in manufacturing activity was compounded by another weak regional manufacturing update, with the Richmond Fed Manufacturing index down 8 points in July. A downturn in new home sales and a broader property market contraction added further stress to the USD. The dollar index fell 0.4% on the day, only finding support late in the overnight session.

In other news, the euro failed to capitalise on the dollars downturn, holding below parity, as Euro Area PMI data painted a bleak picture. A contraction in activity led by Germany and France will likely worsen through Q3 and Q4, as rising inflation and spiraling energy prices crimp future upside. Having touched highs at 1.000, the euro currently buys 0.9960 US cents.

Our attentions turn now to US durable goods orders, pending home sales and more commentary from Fed officials.

Expected Ranges

  • AUD/USD: 0.6870 - 0.6980 ▲
  • AUD/EUR: 0.6880 - 0.6950 ▲
  • GBP/AUD: 1.6980 - 1.7220 ▼
  • AUD/NZD: 1.1080 - 1.1180 ▲
  • AUD/CAD: 0.8950 - 0.9030 ▲