AUD underperforms despite US dollar misstep
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Daily Currency Update
The Australian dollar underperformed through trade on Wednesday, unable to capitalise on a weaker USD. Comments by former President and Republican nominee Donald Trump sparked a USD sell off and risk off move after he indicated he would prefer a lower dollar relative to the yuan and the yen. The DXY dollar index gave up 0.5% yet the AUD edged lower on the day and was the worst-performing major unit. With little local data to drive direction, investors appeared reluctant to reverse the week's retracement from highs approaching US$0.68, wary that a Trump presidency could damage regional performance, the Chinese economy for example. Having given up 0.1% on the day the AUD opened this morning near US$0.6730.Our attention now turns to domestic labour market data for June. We expect some 25,000 jobs will have been added to the economy while the unemployment rate should remain stable at 4%. A print in line with these expectations could signal the labour market is resilient to further rate hikes and a longer period of tighter monetary policy and could elevate calls for the RBA to lift rates once more, potentially adding support to the AUD.
Key Movers
The US dollar tracked lower against most major counterparts through trade on Wednesday as pricing for a Fed rate cut firmed and comments from former President Trump sparked a sell off. Trump suggested he would prefer to see the dollar weaken against major trading partners, particularly the yen and the yuan to improve US economic competitiveness. The comments sparked a risk off move and sent the USD lower across the board with the yen and Swiss franc the primary beneficiaries as investors looked for haven assets outside the USD. With the USD on the back foot, the euro rallied through 1.09, marking session highs just short of 1.0950 while the GBP broke above 1.30, marking highs not seen since July 2023. Sterling found added support in stronger-than-expected inflation data. Headline inflation held steady at 2% while core inflation printed above consensus estimates at 3.5%. With inflation sticky the market reduced the likelihood of the Bank of England rate cut next month, pricing just a 35% probability of a policy shift.Our attentions today turn to the European Central Bank. We expect they will vote to leave rates on hold, having cut last month but the commentary and rhetoric surrounding the decision will prove key in shaping direction. US jobless claims will also be keenly monitored as US labour market performance and resilience are key to shaping near-term Fed rate expectations.
Expected Ranges
- AUD/USD: 0.6680 - 0.6790 ▼
- AUD/EUR: 0.6120 - 0.6230 ▼
- GBP/AUD: 1.9100 - 1.9400 ▲
- AUD/NZD: 1.1000 - 1.1150 ▼
- AUD/CAD: 0.9180 - 0.9250 ▲