Aussie dollar lower after strong US data
Wednesday 17 November, 2021
Daily Currency Update
AUD - Australian Dollar
Tuesday’s session saw the Australian dollar fall against the greenback, as stronger than expected retail sales and industrial production data out of the world's largest economy boosted demand for the greenback. Although it held its ground above 0.7300, AUD/USD fell from 0.7367 to 0.7302 throughout trade and with the NZD/USD also falling back below the key 0.7000 handle, AUD/NZD was able to eke out modest gains, rising from 1.0420 to 1.0455. AUD/EUR was able to hold on to most of Monday’s ECB led gains, falling modestly, with the pair currently trading hands this morning at 0.6450.
We did get the release of the RBA minutes yesterday. No new information was provided to the market, and therefore the market's reaction to the release was minimal. Governor Lowe also spoke about inflation, remaining unconcerned about rising domestic inflation and reiterated his thinking that Australia’s inflation is ‘different’ from the global inflationary environment. The market's view of a number of rate hikes from 2022 is still at odds with the RBA’s view of no rate hikes until 2024.
As we mentioned above, US retail sales surprised to the upside overnight, posting a 1.7% month on month rise for October, coupled with upward revisions to previous data. Sentiment was further boosted by a 1.6% month on month increase in US industrial production data in October, with analysts noting an 11% increase in auto production as a big upside surprise given the ongoing global shortage of semiconductors. Both sets of data boosted demand for the US dollar, allaying some lingering fears about the strength of consumer sentiment in the USA.
With inflation the hottest topic in markets at present, today's docket will deliver a few data points of interest, starting with NZ PPI and Australian wage data. Moving offshore, we will get UK CPI as well as Canadian CPI, which are expected to maintain the trend of rising inflationary pressures and increased likelihood of rate hikes throughout 2022.
From a technical perspective, AUD/USD demonstrated strong downside support at 0.7300 however a move below this handle could open the door to 0.7275. On the topside, early November highs around 0.7500 seem awhile off, a break through 0.7370 could see a test of 0.7400.
Key MoversOur market mover for today is the GBP. We got a peek into the strength of the UK labour market overnight, with the data beating market expectations and exhibited a strong rebound in activity despite the completion of government support. Payroll employment lifted by 160k and most importantly, there was no evidence that the 1.1M residents who were taking advantage of the government support were added to the unemployed number.
The reason this is important is that it adds weight to the case for a rate hike from the BOE at their December meeting. We have already seen BOE Governor Bailey reference concerns about the unknown situation in the labour market as support was withdrawn as a key consideration in the bank's thinking regarding possible rate hikes.
Against a backdrop of a rising USD across the board, the strong data meant the GBP was able to hold its ground against the world's reserve currency at 1.3450. NZD/GBP fell back towards 0.5200 and AUD/GBP similarly fell to levels around 0.5430.
- AUD/USD: 0.7270 - 0.7370 ▼
- AUD/EUR: 0.6400 - 0.6500 ▼
- GBP/AUD: 1.8300 - 1.8420 ▲
- AUD/NZD: 1.0400 - 1.0500 ▲
- AUD/CAD: 0.9130 - 0.9230 ▼