AUD/USD trades below 70 US cents

Daily currency update

The Australian dollar is slightly weaker this morning when valued against the Greenback. The Aussie dollar collapsed after US economic data on Friday showed that the labor market remained tight, and it would keep the US Federal Reserve under pressure to bring down inflation to the 2% target. At the time of writing, the AUD/USD exchanges hands at around 0.69 US cents. Last week Business confidence fell considerably in Q4 as concerns about global and domestic economic growth mounted. Still, business conditions remained strong, albeit easing from the highs seen in Q3. The easing in conditions was evident across industries and states, but all remained in positive territory. Looking ahead this week and today the Australian Bureau of Statistics will release monthly retail sales figures which is the primary gauge of consumer spending, which accounts for the majority of overall economic activity.  On Tuesday all eyes will be on the Reserve Bank of Australia (RBA) official cash rate announcement which is expected to lift the interest rates by another 0.25% from 3.10% to 3.35%. Although it’s not a given. The Reserve Bank could use its first meeting of the year to deliver a super-sized 0.4 percentage point lift in official interest rates as the RBA’s aggressive tightening of monetary policy is now starting to bite across the economy.

Key movers

On Friday in the United States US jobs data surprised investors as further Federal reserve action is now expected. The US Department of Labor (DoL) revealed January data that surprised investors, with Nonfarm Payrolls smashing expectations after the economy created 517K jobs in the month, exceeding estimates for the creation of just 185K jobs. Consequently, the Unemployment Rate fell to 3.4% from 3.5%, while December’s figures were revised upward. Average Hourly Earnings, sought by the US Federal Reserve as a measure of wages inflation, linked to last week’s Employment Cost Index (ECI), came in at 0.3% MoM, in line with forecasts but lower than December’s report. Job growth was widespread, led by gains in leisure and hospitality, professional and business services, and health care. Employment also increased in government, partially reflecting the return of workers from a strike. Last week the Federal Open Market Committee (FOMC) announced a 25 basis point increase in its benchmark rate range to 4.50 – 4.75 percent. The increase was a further step down in pace from the 50 bp increase in December and the 75 bp hike in November. On Wall Street, the Nasdaq 100 and Dow Jones fell -1.59% and -0.38% Friday. Still, the former ended the period in the green. Across the Atlantic Ocean, the FTSE 100 and DAX 40 rose 1.76% and 1.91%, respectively. Things were more pessimistic in Asia, with the Hang Seng Index sinking by 4.53%.

Expected ranges

• AUD/USD: 0.6800 – 0.6900 ▼
• AUD/EUR: 0.6300 – 0.6500 ▼
• GBP/AUD: 1.7300 – 1.7500 ▲
• AUD/NZD: 1.0750 – 1.0650 ▲
• AUD/CAD: 0.9100 – 0.9300 ▲