AUD continues post RBA slide
Thursday 6 April, 2023
Daily Currency UpdateThe Australian dollar continued its post-RBA slide through trade on Wednesday, slipping back below US$0.67. Safe haven flows dominated direction following headlines suggesting Western Alliance Bancorp had seen a sharp decline in deposits through Q1. The KBW bank index fell while key equity indices plunged as investors immediately assumed the worst. The AUD pitched to intraday lows south of US$0.6680 before finding support. Initial reports filed by Western Alliance excluded information on deposits and upon clearer review, market fears tapered. Having steadied, the AUD climbed back above US0.67 after softer-than-anticipated ADP private payroll and ISM service data. With US treasury yields falling through the latter part of the overnight session, the AUD clawed its way back toward US$0.6720 and currently buys US$0.6718.
Our attentions turn now to the RBA’s Financial Stability Review, though we don’t expect it will offer anything specific to sway direction into the Easter long weekend. Instead, we look to US Non-Farm payroll data on Friday. With markets closed we could well see elevated price action overnight as investors look to square positions. With employment conditions softening, a modest print could drive down Fed rate hike expectations and help the AUD climb back toward US$0.68/0.69.
Key MoversA risk-off tone dominated direction through trade on Wednesday, allowing the USD to shrug off another round of softer-than-anticipated macroeconomic data sets. ADP private payroll data and an ISM services index update both point toward a softening labour market and a decline in consumer economic activity. With Jobs growth slowing and wages projected to fall, pressure to adopt a softer approach to Monetary Policy tightening is growing. While enjoying modest gains against the Euro, GBP and commodity-driven currencies, the USD fell against the Yen. Amid a backdrop of lower global rates and a risk-off mood, the Yen outperformed on Wednesday, forcing the USD back toward 131.
With US data turning negative this week, our attention shifts to US non-farm payrolls for a more in-depth and detailed review of labour market health. While employment conditions remain steady, signs are emerging to suggest the power is shifting away from employees. With quit rates falling and new employment opportunities declining, we anticipate only a modest uptick in Jobs growth through March. Consensus expectations suggest a further 240,000 jobs were added through the month while the unemployment rates should remain flat and wage inflation taper. A softer-than-anticipated read could drive down peak Fed fund rate expectations and elevate calls for the Fed to pause its tightening cycle in May. With the US seemingly running headlong toward recession, labour market date will prove key in shaping policy expectations and near team dollar direction.
Please Note, there will be no commentary delivered over the Easter Long Weekend. Our next report will be sent Tuesday, April 11th.
- AUD/USD: 0.6620 - 0.6780 ▼
- AUD/EUR: 0.6100 - 0.6200 ▼
- GBP/AUD: 1.8220 - 1.8720 ▲
- AUD/NZD: 1.0600 - 1.0700 ▼
- AUD/CAD: 0.8980 - 0.9120 ▼