AUD ekes out small gains despite gloomy domestic outlook
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Daily Currency Update
The Australian dollar edged slightly higher on Wednesday as conflicting drivers ensure the currency remains well contained within a relatively narrow handle. Having tracked sideways through the local open, the AUD feel through US$0.67, toward intraday lows of US$0.6668 after domestic Q2 GDP data fell short of expectations. The economy grew at snail's pace in the 3 months to June, expanding just 0.2% for the quarter marking an annual pace of growth of just 0.9%, well short of RBA expectations. While the softer read was expected, the devil was in the detail with government spending and elevated migration activity key drivers propelling growth. Private consumption has cratered as households continue to feel the strain of cost-of-living pressures. In fact, with the exclusion of migration, the Q2 data marks the 6th consecutive quarterly period where activity declined, suggesting we are in fact mired in recession. The soft data elevated calls for the RBA to cut rates sooner but with inflation pressures still elevated and the labour market proving resilient, it is unlikely we will enjoy any reprieve before Q1 next year. The AUD tracked sideways through the rest of the session struggling to break back above US$0.67 before softer US jobs data and a sharp sell-off across US treasuries helped lift the AUD to intraday highs at $0.6744 before settling near US$.6720.Our attentions now turn to the US ISM services data and ADP employment numbers as key indicators of US macro health leading into tomorrow critical non-farm payroll print.
Key Movers
The US dollar fell through trade on Wednesday as softer-than-expected JOLTS jobs data spooked investors and elevated calls for a 50-point Fed rate cut. Job openings plunged to their lowest level in 3 years as vacancy rates and the resignation rate declined. The report when coupled with the Fed’s beige book paint a gloomy near-term picture for the US economy. Markets reacted to the jobs data and Beige Book by triggering a steep decline in Treasury yields, driving the USD down against all G10 pairs. The DY and BBDXY indices fell near half a percent while the Japanese yen lead gains, buoyed by the elevated risk aversion.As anticipated, the Bank of Canada cut rates by 25 basis points and doubled down on its call to expect more easing assuming inflation continues to fall. The decision was largely priced in and had little impact on CAD value as the Canadian dollar edged higher in line with other majors, buoyed by USD softness. With the euro trading back near US$1.11 and Sterling just south of US$1.3150, our attentions turn to US ISM services data and ADP employment numbers as key indicators of US macro health leading into tomorrow critical non-farm payroll print.
Expected Ranges
- AUD/USD: 0.6620 - 0.6780 ▲
- AUD/EUR: 0.6020 - 0.6150 ▼
- GBP/AUD: 1.9350 - 1.9650 ▲
- AUD/NZD: 1.0800 - 1.0900 ▼
- AUD/CAD: 0.9020 - 0.9120 ▼