Home Daily Commentaries AUD under pressure as US employment data bolsters near term yields

AUD under pressure as US employment data bolsters near term yields

Daily Currency Update

The Australian dollar slipped back below US$0.6650 over the Easter break, weighed down by a slew of US data sets. US treasury yields rose on Friday, buoyed by another strong US non-farm payroll print. Payrolls climbed more than 230,000 in March, in line with market expectations lifting yields and dragging the USD higher.

Having tested a break above US$0.67, the AUD slumped back below this handle, compounding losses through trade on Monday to mark weekend lows below US$0.6620. With another Fed rate hike all but priced in, we expect the AUD to remain under pressure through the near term. While supported on moves below US$0.66, upside moves will likely meet resistance above US$0.6750 and approach US$0.68.

Our attentions turn this week to US CPI and PPI inflation data ahead of retail sales. Despite the robust employment update last week, cracks are beginning to appear across the US economy. Labour market conditions are easing and leading indicators point to significant weakness ahead.

While markets have priced in a 25-point hike in May, the Fed may need to consider pausing its current tightening cycle as we move toward and through June. All things being equal, a correction in US rate expectations will likely be the catalyst the AUD needs to climb back toward US$0.70

Key Movers

There is ample to digest as we return from the Easter long weekend after a slew of US data sets and shifting yield expectations helped underpin USD gains and drive down the yen and commodity currencies. Steady US non-farm payrolls data was enough to overshadow an uptick in US jobless claims, and a downturn in leading employment indicators as markets moved to price in a 25-point rate hike come the Fed’s next meeting in May.

Payrolls climbed by 230,000 in March, buoyed by a near 50k uptick in government jobs. The USD advanced against most counterparts as the yen led losses among majors. The improvement in US yields and a broad uptick in global rates forced the yen lower.

Commentary from new Bank of Japan Governor Ueda offered little to inspire expectations policymakers may look to abandon their outdated yield curve control policy. Ueda stressed the importance of maintaining the current platform proffering a “business as usual” mantra.

The dovish tone saw the yen give up 133, allowing the USD to mark new highs at 133.65, up near 2%. While the euro slid back below 1.09, and the GBP back below 1.24.

Our attention turns this week to US CPI and PPI inflation data ahead of the UK GDP, a Bank of Canada policy update and US retail sales.

Expected Ranges

  • AUD/USD: 0.6580 - 0.6750 ▼
  • AUD/EUR: 0.6080 - 0.6180 ▼
  • GBP/AUD: 1.8580 - 1.8820 ▲
  • AUD/NZD: 1.0650 - 1.0750 ▲
  • AUD/CAD: 0.8920 - 0.9020 ▲