Daily Currency Update
The AUD underperformed through trade on Wednesday, sliding back below US$0.6550 to close flat after a relatively quiet trading day. Global rates continued to fall, led by weaker oil prices and softer than anticipated US ADP payroll data. Having worked hard to move back toward US$0.66 through the domestic session, the AUD tracked lower through the latter hours of offshore trade testing a break below US$0.6550 and marking intraday lows at US$0.6548. With little headline newsflow on hand to drive direction markets seemed content in tracking a narrow range ahead of critical US Non-Farms payroll numbers Friday. The softer-than-anticipated ADP payroll print may serve as a guide to broader labour market performance. Should wage inflation and jobs growth slow the pressure on the Federal Reserve to call an end to the tightening cycle will grow, putting more downward pressure on US yields and fording the AUD an opportunity to push back above US$0.66. A stronger print will leave the prospect of a rate hike on the table and could see the AUD slip back toward US$0.65 and US$0.6450.
Key Movers
Net moves across currency markets were muted through trade on Tuesday with most major tracking within a 0.2% range when valued back against the USD. Oil prices fell to their lowest level in 5 months, helping extend the global bond market rally, while driving global rates lower. The USD managed to retain gains won through Monday and Tuesday as the Euro consolidated a break below 1.08 and the GBP continued to trade below 1.26. German factory orders unexpectedly plummeted through October, down nearly 4% as a collapse in offshore orders comfortably countered an uptick in domestic activity. The surprise print points to the sluggish nature of the German economy and supports calls for easier European Central Bank (ECB) policy through 2024. With little headline data on hand today our attention turns to US non-farm payroll data Friday. ADP private payroll, although not the best market of full labour market performance, underperformed through November with private payrolls rising by just 103,000 well short of the 130,000 new jobs expected to be created, while wage inflation slowed, speaking to the broader softening in the labour market. If those numbers are mirrored in the more comprehensive non-farm payroll print the market will likely elevate calls for the Fed to end the tightening cycle and forecast easier policy through 2024.
Expected Ranges
- AUD/USD: 0.6500 - 0.6690 ▼
- AUD/EUR: 0.6020 - 0.6120 ▼
- GBP/AUD: 1.9000 - 1.9300 ▲
- AUD/NZD: 1.0600 - 1.0720 ▼
- AUD/CAD: 0.8850 - 0.8950 ▼