Australian Dollar rallies on a Brexit deal

AUD - Australian Dollar

The Australian Dollar witnessed a push higher on Thursday on the back of a bullish jobs report for September. Having opened the day at 0.6758, the AUD/USD pair spiked to an intraday high of 0.6791 as Australia’s unemployment rate fell unexpectedly to 5.2 percent. The numbers were an improvement on the previous month and with the RBA’s main priority being the labour market and in particular the unemployment rate it was enough for the market to reduce the chance of another imminent rate cut by the RBA next month in November. It is still important to note that the numbers are well above the RBA’s target range of 4.5 percent and the RBA has said “an extended period of low interest rates will be required in Australia to reach full employment and achieve the inflation target”.

Meanwhile, overnight the Australian Dollar witnessed a further rally pushing through 68c to a high of 0.6833 against the Greenback with Brexit developments being the key driver. Opening this morning at 0.6822, we see initial support at 0.6800 followed by 0.6760. The market faces near term resistance at 0.6850 followed by 0.6890.

Looking ahead, the domestic docket will see the RBA Governor Low deliver a speech today at the International Monetary Fund. Also, all eyes will be on China’s GDP figures where economist are predicting a further slowdown in the third quarter from 6.2 percent to 6.1 percent year-on-year. Any deeper contraction would raise concerns about the Chinese economy which might have an affect on the Aussie.

Key Movers

The US Dollar saw deterioration overnight against the Pound as reports that the UK and EU had agreed to a new deal ahead of the EU summit. The GBP/USD reached 3 month highs of 1.2989 on the back of the Brexit news. Focus now lies on Saturday where the MPs will vote to whether they back the new deal or not. The Euro had similar sentiment, where we saw a 2% increase in the EUR/USD touching a high of 1.1139 following Brexit news. The overnight developments highlights the importance of Brexit and subsequently the impact optimism can have on the GBP and EUR.

Meanwhile, on the data front, UK retail sales softened as British shoppers were more cautious of their spending in the three months to September as raising concerns about the health of the economy in the run-up to Brexit. Looking at the third quarter as a whole, which strips out monthly volatility, quarterly sales growth held steady at 0.6 percent while the annual pace of expansion dropped to 3.1 percent from 3.6 percent in the second quarter, the weakest since the late 2018. Over in the U.S, Federal Reserve business activity fell to 5.6 in October from 12 in September. Economists surveyed the reading at 7.1, any reading above 0 indicates improving conditions.

Expected Ranges

AUD/USD: 0.6760 - 0.6890 ▲

GBP/AUD: 1.8650 - 1.9200 ▲

AUD/NZD: 1.0690 - 1.0800 ▲

AUD/EUR: 0.6080 - 0.6170 ▲

AUD/CAD: 0.8900 - 0.9020 ▲