AUD/USD – Under Pressure After Solid US Job Claims

AUD/USD is stable on Thursday, as the pair trades slightly below the 0.93 line in the North American session. In economic news, Australian CB Leading Index gained 0.4% in July, a six-month high. In the US, Unemployment Claims beat the estimate, coming in at 298 thousand. Later in the day, we'll get a look at the Philly Fed Manufacturing Index. The markets are braced for a sharp drop in the July reading.

In a highly anticipated event, the Federal Reserve released its policy meeting minutes on Wednesday. The minutes were hawkish in tone, with the Fed saying that an interest rate hike could come sooner rather than later if employment numbers continue to improve. The Fed said that the economy continues to improve, but the QE program, which is scheduled to wind up in October, will not be accelerated.

The US economy has been moving in the right direction, but inflation numbers in the US remain at very low levels. On Tuesday, CPI and Core CPI, the primary gauges of consumer inflation, both posted paltry gains of 0.1%. These weak readings come on the heels of PPI, a manufacturing inflation index, which also came in at 0.1% last month. Weak inflation is one reason why the Federal Reserve is in no rush to raise interest rates, as low inflation points to slack in the economy. Meanwhile, US housing numbers were sharp on Tuesday. Building Permits improved to 1.05 million, beating the estimate of 1.00 million. Housing Starts jumped to 1.09 million, easily beating the estimate of 0.97 million.

Financial leaders and central bankers from around the world will gather in Jackson Hole, Wyoming for a conference which starts on Thursday. This will be Janet Yellen's first appearance as Fed chair at the conference. There is speculation that Jackson Hole could be a currency event, which would be a marked departure from the conference's usual focus on the US labor market and monetary policy. If this is the case, we could see a sharp reaction from the currency markets. Traders should treat Yellen's speech as a market-moving event.

RBA Governor Glenn Stevens testified before parliament on Tuesday, and his remarks weighed on the Australian dollar, which dipped below the 0.93 line. Stevens said that in the present economic environment, the economic needed an injection of confidence rather than lower interest rates. Stevens also warned that the risk of the Australian dollar dropping to lower levels was “underestimated". His comments follow the minutes from its recent policy meeting, and the tone was somewhat pessimistic. Policymakers stated there was a "significant degree of uncertainty" in the economic outlook, and therefore a rate decrease is unlikely. With the RBA lowering its growth and inflation forecasts and employment data slipping in July, the Australian dollar could lose some ground.

AUD/USD 0.9293 H: 0.9298 L: 0.9238