AUD – Australian Dollar
Finally, some volatility. The Australian dollar fell sharply through trade on Thursday amid a fall in risk demand and a stronger US dollar. Having tracked sideways for much of the domestic session, the AUD slipped below 0.77 US cents and through key supports at 0.7680 overnight as investors responded to strong US macroeconomic data sets. The ISM services index hit a 24-year high while the ADP employment data, a precursor for Friday’s full non-farm payroll print, wrote in well beyond initial estimates. While strong at face value, the sub-context, particularly within the services PMI data helped further fuel gains. Prices Paid reached their second highest level on record, affirming fears supply constraints continue to drive up input costs and heighten inflation expectations. The strong labour market print and recovering labour market bolstered expectations the Fed will move to discuss a plan to taper bond buying sooner than currently estimated. Having slipped below 0.7650 to touch intraday lows at 0.7648 our attentions turn to tonight’s US non-farm payroll report. A bumper print could see markets consolidate the USD upturn and heap downward pressure on the AUD.
The USD was far and away the biggest mover overnight, outperforming all major currencies in one of its best daily appreciations in 9 months. The DXY index advanced some 0.7% as treasury yields rebounded and stronger than expected macroeconomic fundamentals drove expectations for a change in monetary policy and QE.
While falling against the USD, the GBP still outperformed most other major counterparts, amid sustained expectations economic activity will continue to recover ahead of schedule as the economy re-opens. Having been range bound between 1.41 and 1.42 for much of the last few weeks, sterling slipped briefly below supports to touch 1.4090, before edging higher into this morning’s open.
The euro sits sharply lower, giving up 1.22 and 1.2150 to buy just 1.2119 at time of writing, while the USD pushed above 110 against the yen.
Attentions tonight are firmly with US non-farm payroll data. If they mirror the bumper ADP employment print, the dollar could carry the rally into the weekend and add more downward pressure on major counterparts.
AUD/USD: 0.7530 – 0.7760 ▼
AUD/EUR: 0.6290 – 0.6360 ▼
GBP/AUD: 1.8220 – 1.8580 ▲
AUD/NZD: 1.0680 – 1.0780 ▲
AUD/CAD: 0.9220 – 0.9340 ▼