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AUD buoyed by softening in US payrolls

Daily Currency Update

The Australian dollar rebounded through trade on Friday following a softer than anticipated US non-farm payroll print. The AUD tracked between US$0.6620 and US$0.6650 through the domestic session as investors sought to sideline major bets until after the labour market update. Non-farm payrolls increased by 209,000 just short of consensus estimates, while last month's number was revised sharply lower. The downward revision in May payrolls is a clear signal the Fed’s aggressive monetary policy program is beginning to dampen labour market strength. US treasuries fell after the payroll release, forcing the US dollar lower and allowing the AUD to pitch toward US$0.67. While the AUD found support in a stronger CNY fixing by the PBoC it was unable to extend through US$0.67 and instead edged back toward US$0.6680 leading into the weekly close. Despite the softening in payroll performance markets are still pricing a 90% chance the Fed will increase rates by 25 basis points at the end of the month and market pricing for a peak Fed Funds Rate is little changed.
Our attentions turn now to Chinese PPI and CPI data as headline markers on an otherwise quiet docket.

Key Movers

The US dollar is lower across the board following the softer US non-farm payroll print. After a tumultuous week across global bond markets 2- and 10-year yields fell following the data release, before retracing the fall amid little net change. Two-year yields closed only marginally lower on the day while 10 year yields fully retraced the post data downturn to close 3 points higher on the day and 20 points higher on the week. The USD slipped back below 7.22 against the CNY as the PBoC set yet another stronger reference rate, while domestic banks lowered US dollar deposits in a bid to support the Yuan. Amid a weaker US dollar backdrop the Euro lurched back above 1.09 and 1.0950 while the Great British Pound broke free of 1.27, punching through 1.28 and 1.2850 to mark session highs at 1.2854. With global bond rate tempered the USD fell sharply against the Yen, giving up 144.80 to trade just above 142 on open this morning.
With little of note on today’s macro ticket, our attentions turn to commentary from the RBNZ, Bank of Canada, Bank of England, and US CPI data as the headline items crowding the docket through the week.

Expected Ranges

  • AUD/USD: 0.6580 - 0.6730 ▲
  • AUD/EUR: 0.6020 - 0.6120 ▲
  • GBP/AUD: 1.8920 - 1.9320 ▲
  • AUD/NZD: 1.0730 - 1.0880 ▼
  • AUD/CAD: 0.8780 - 0.8920 ▲