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AUD charges toward 0.74 US cents amid softer US labour market

Thursday 2 September, 2021

Daily Currency Update

The Australian dollar recovery continued through trade on Wednesday outpacing major counterparts amid an uptick in demand for risk. Having tracked sideways through much of the domestic session as investors ignored stronger than anticipated Q2 GDP data, the AUD extended through 0.7350 overnight marking fresh 2-week highs at 0.7381. Leading US labour market data detailed a much weaker than anticipated uplift in employment growth, consolidating the slowdown seen through July and exacerbating fears the Delta variant will act as a handbrake on the broader economic recovery. The US dollar fell sharply as expectations of a strong labour market to drive immediate near-term Fed policy change faltered. Having consolidated a break above 0.73 our attentions turn now to Friday’s non-farm payroll print for a complete look at US employment conditions. With analysts now estimating jobs growth will fall between 400,000 and 750,000, there is amply scope for volatility. A soft read could help propel the AUD back through 0.74 US cents.

Key Movers

The US dollar is lower across the board this morning having given up ground to all major counterparts. The dollar index slipped 0.25% as investors scrambled to adjust expectations leading into Friday’s non-farm payroll print. Leading employment data released Wednesday suggests the slowdown in employment growth seen in July may carry through to August as the impacts of the Delta variant are felt across the economy. ADP private payrolls printed well below expectations, suggesting a lift of just 374K. With markets anticipating labour growth closer to 750-800K, the soft read assuages fears the Fed will be forced to bring forward a program of QE tapering. The promise of an extended period of uber accommodative monetary policy helped drive demand across risk assets on Wednesday. Our attentions now turn to Friday’s Non-farm payroll print for a complete picture of labour market conditions. A print below 700K won’t meet the Fed’s criteria “for substantial progress” and could well see an announcement regarding the tapering of bond purchases delayed into November. As risk sentiment improves and fed expectations shift the USD could come under ongoing pressure.

Expected Ranges

  • AUD/USD: 0.7290 - 0.7420 ▲
  • AUD/EUR: 0.6180 - 0.6250 ▲
  • GBP/AUD: 1.8520 - 1.8790 ▼
  • AUD/NZD: 1.0370 - 1.0450 ▲
  • AUD/CAD: 0.9180 - 0.9350 ▲