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Daily currency update

The Australian dollar advanced beyond US$0.68 through trade on Thursday, extending Wednesday’s upward surge amid a weaker US dollar backdrop and improved risk narrative. The fallout from Fed Chair Jerome Powell’s dovish address continued through Thursday as markets moved to re-adjust expectations for Fed policy. With US treasury yields on the back foot, softer than anticipated manufacturing data and inflation indicators prompted markets to extend US rate and dollar downside. Having toyed with a break above US$0.68 through the domestic session, the AUD moved through resistance buoyed by new signs China is loosening its Covid restrictions. The AUD touched intraday highs at US$0.6840 before drifting lower on the lead into this morning’s open. The AUD currently buys US$0.6815. Our attentions turn now to US non-farm payroll data. A robust labour market has been key in guiding Fed policy and while we anticipate another healthy read, the pace of wage growth and job creation has begun to slow. A softer than anticipated performance could be the catalyst to help catapult the AUD through US$0.6850, while a strong print will likely give analyst reason to pause, pushing the AUD back toward familiar ranges between US$0.66 and US$0.68

Key movers

The US dollar has extended the weeks downturn as fallout from Jerome Powell’s dovish address continued through trade on Thursday. Markets continue to adjust expectations for US monetary policy while weaker than anticipated US manufacturing data and a downturn in US inflation indicators added more pressure on US rates and treasury yields. The DXY dollar index gave up 1% on the day as the GBP, JPY and euro all enjoyed sustained support. The GBP surged through £1.23, while the euro consolidated a break above €1.05 and the yen forced the USD back toward ¥‎135.50. Outside majors the Chinese yuan was the days big winner as further signs China is loosening Covid restrictions helped fuel an extension in the recent upward recovery. Our attentions turn now to US non-farm payroll data where market consensus is for a further moderation in employment growth and a marginal uptick in unemployment. Labour market performance remains key in shaping Fed policy expectations. While underlying employment indicators remain strong, increasing jobless claims, particularly rising continuing claims, suggest it is becoming harder to find a new job after being laid off. With re-employment becoming increasingly difficult, signals for recession in the US continue to grow and a downturn in US non-farm payrolls will likely compound USD weakness and open the door for gains across key majors.

Expected ranges

  • AUD/USD: 0.6600 – 0.692 ▲
  • AUD/EUR: 0.6420 – 0.6550 ▼
  • GBP/AUD: 1.7720 – 1.8180 ▲
  • AUD/NZD: 1.0650 – 1.0820 ▼
  • AUD/CAD: 0.9080 – 0.9220 ▲
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