Home Daily Commentaries Aussie dollar holds falls back below 68 US cents

Aussie dollar holds falls back below 68 US cents

Monday 5 December, 2022

Daily Currency Update

The Aussie dollar is slightly weaker this morning when valued against the greenback. On Friday the Australian dollar dropped against the US Dollar following the release of a positive employment report in the United States which showed an increase in wages, pressuring the Federal Reserve (Fed) to take action. The Australian dollar reverses an intraday dip below the 68 US cent level and turned positive for the fourth successive day on Friday. In China, several cities announced a further relaxation of Covid restrictions over the weekend, which may see risk assets start the week on the front foot. The easing of restrictions could lead to a surge in daily cases in the coming few months, hitting near-term economic activity, but the medium-term outlook would be much brighter without the zero-Covid policy. At the time of writing, the AUD/USD is trading at 0.6757 after hitting a daily high of 0.6831 the highest level since September 13. Looking ahead this week and on Monday we will see the release of the Australian Industry Group (AIG) Construction Index a survey of about 200 construction companies that asks respondents to rate the relative level of business conditions including employment, production, new orders, prices, supplier deliveries, and inventories. We will also see the release of Australia and New Zealand Banking Group (ANZ) monthly Job Advertisements. On Tuesday all eyes will be on the Reserve Bank of Australia (RBA) Interest Rate Statement which is expected to lift interest rates by 0.25 bps again from 2.85% to 3.10%. On Wednesday the Australian Bureau of Statistics will release the quarterly Gross Domestic Product (GDP) the broadest measure of economic activity and the primary gauge of the economy's health.

Key Movers

On Friday US stocks are trading with losses after November’s US Nonfarm Payrolls (NFP) report. Data showed that the economy added 263,000 new jobs, and October’s was upward revised 284,000 jobs, the Department of Labor (DoL) report showed. In the same statement, the Unemployment Rate was unchanged at 2.7%, while Average Hourly Earnings rose by 5.1% YoY, vs. 4.6% consensus, reigniting wage inflation spirals, adding further pressure on the Fed. Canada’s employment report on Friday was also stronger on balance, with 10k job growth matching consensus expectations but the unemployment rate unexpectedly falling to 5.1%, near its lowest levels since the 1970s. Strong job growth for core-aged women helped push the national unemployment rate even lower to 5.1 per cent in November, according to Statistics Canada. Women aged 25 to 54 set a new employment rate record in November at 81.6 per cent after adding 25,000 jobs last month, the federal agency said. That’s the highest that figure has stood since data tracking started in 1976 and trumps the previous record of 81.4 per cent set in May 2022. Canada’s labour market has remained remarkably strong despite signs of an economic slowdown. In November, wages were up 5.6 per cent compared to a year ago, marking the sixth consecutive month of above 5.0 per cent growth. The market still favours the Bank of Canada to hike by 25bps next week, with a 50bps move seen as an outside chance (~25% priced in).

Expected Ranges

  • AUD/USD: 0.6650 - 0.6850 ▼
  • AUD/EUR: 0.6300 - 0.6500 ▼
  • GBP/AUD: 1.7900 - 1.8100 ▲
  • AUD/NZD: 1.0500 - 1.0700 ▼
  • AUD/CAD: 0.9000 - 0.9200 ▼