Aussie dollar trades above 68 US cents
Monday 12 September, 2022
Daily Currency UpdateOn Friday the Australian dollar finished the week slightly stronger trading above 68 US cents on modest USD weakness. The AUD/USD peaked during the European session at 0.6877, the highest level since August 31, and then pulled back amid the stabilisation of the greenback. The retreat found support at 0.6820 and the pair is about to end the week on a positive note with gains. After having powered up to a fresh 20-year high mid-week, the USD met some fresh broad-based selling pressure during Friday’s Asian trading session for no obvious reason other than risk appetite looked to be improving, as evidenced by rising S&P futures.
On the data this week and on Tuesday we will see the Westpac Consumer Sentiment and National Australia Bank (NAB) Business Confidence. Both are leading indicators of economic health. On Thursday all eyes will be on the unemployment rate decision by the Australian Bureau of Statistics. The forecast is for the jobless rate to remain at 3.4% with 35.5K jobs being created in the previous month. Job creation is an important leading indicator of consumer spending, which accounts for a majority of overall economic activity.
Key MoversThe Dow Jones Industrial Average soared more than 300 points on Friday, cementing a three-day rally and breaking a three-week losing streak as both the US dollar and Treasury yields took a breather from their recent surges and moved lower. A declining dollar is a boon for US stocks, especially multinational stocks that have high costs in the US but sell a lot of their products overseas. The US dollar index is down just 1.5% from its recent cycle high of $110.70. Meanwhile, the 10-year US Treasury yield has fallen just a few basis points from its recent high of 3.35%. The S&P500 rose 1.5%, taking its weekly gain to 3.7%. Rather than fundamentals driving the market, traders saw this as a short-covering rally, with the most-shorted stocks performing the best. One potential downside risk in the week ahead for the USD is the release of the latest US CPI for August. The Federal Reserve has already downplayed the weaker US CPI report for July, but another weaker CPI report for August could challenge market expectations for a third consecutive 75bps hike later this month.
- AUD/USD: 0.6700 - 0.6900 ▲
- AUD/EUR: 0.6670 - 0.6870 ▲
- GBP/AUD: 1.6900 - 1.7100 ▼
- AUD/NZD: 1.1050 - 1.1250 ▼
- AUD/CAD: 0.8800 - 0.9000 ▲