Home Daily Commentaries AUD outperforms as labour market strength all but guarantees rates higher for longer

AUD outperforms as labour market strength all but guarantees rates higher for longer

Matt Richardson
Written by
Matt Richardson

Matt Richardson

OFXpert

Matt provides expertise in currency risk management to his clients, drawing from his 14 years of experience in foreign exchange.

| Friday 16 August, 2024

Daily Currency Update

The Australian dollar outperformed through trade on Thursday, emboldened by stronger domestic labour data and an upswing in risk sentiment. Employment growth in July was near three times that of market estimates, ensuring jobs growth continues to outpace population growth. The uptick in employment opportunities helped fuel a rise in the participation rate, which saw unemployment climb a tenth of a percent to 4.1%. Strength across the labour market dampened calls for the RBA to cut rates before year end, allowing policy makers to leave rates higher for longer in a bid to quash inflation. The AUD jumped back through US$0.66, edging toward intraday highs at US$0.6632, before slipping on the back of stronger US data. With risk sentiment holding in the face of fading US recession fears, the AUD held its own against the USD through the back half of the overnight session and opens this morning just above US$0.6610.

Our attentions turn now to RBA governor Michelle Bullock as she testifies in front of the House of Representatives Standing Committee on Economics. Given the RBA’s hawkish stance, it will be interesting to see if yesterday’s labour market data prompts a doubling down. Looking abroad, UK retail sales data and US consumer sentiment data dominate the offshore ticket.

Key Movers

The US dollar advanced through Thursday, buoyed by stronger than expected retail sales and a dip in jobless claims. The positive macro agenda helped ease fears for recession and spurred further improvement in the risk narrative, driving US equities higher. Treasury yields gained, as market pricing for a 25-point cut come September gathered momentum over calls for a 50 point adjustment. The DXY dollar index advanced 0.4%, while the euro, CHF and JPY all slid. The risk positive backdrop and uptick in yields hurt the CHF and JPY, with both underperforming all other major counterparts. In other news, the GBP outperformed on the day, up a quarter of one percent amid steady GDP data.

Our attentions turn now to commentary from RBA Governor Michelle Bullock, while UK retail sales and US consumer sentiment numbers dominate the offshore ticket.

Expected Ranges

  • AUD/USD: 0.6580 - 0.6650 ▲
  • AUD/EUR: 0.5950 - 0.6050 ▲
  • GBP/AUD: 1.9300 - 1.9600 ▼
  • AUD/NZD: 1.0980 - 1.1080 ▲
  • AUD/CAD: 0.9020 - 0.9120 ▲

Written by

Matt Richardson

OFXpert

As a Senior Corporate Client Manager, Matt provides expertise in currency risk management to his clients, drawing from his 14 years of experience in foreign exchange. Matt has clients who he has been working with for over a decade, a testament to his knowledge and dedication in the field. Matt is also a regular contributor on Ausbiz, offering clear and precise updates on currency market trends, showcasing his ability to interpret complex financial data into actionable insights.