Strong labour market not enough to hold up AUD

AUD - Australian Dollar

The Australian dollar enjoyed mixed fortunes through trade on Thursday, bouncing back toward 0.69 on the back of strong jobs data before giving up gains and closing lower on the day. The domestic unemployment rate fell to 5.1% in December while employment growth grew at a faster pace than expected, propelling the AUD to intraday highs at 0.6880. The positive print helps lessen the likelihood of an RBA rate cut in the near term with futures pricing cut in half for a February hike, down to a 30% probability from 60%.

The AUD was however, unable to sustain the advance giving up all the morning gains as risk off sentiment permeated broader markets. Currencies, equities and commodities all turned lower with investors looking to safe haven assets as fears the coronavirus will extend its reach again spooked markets. Officials in Wuhan province, the centre of the virus outbreak, have halted all outbound transport services, quarantining the city in a bid to halt the viruses spread. With travel warnings now in place for China, markets are concerned as to what this will mean for Chinese domestic consumer demand and its run on effect to global growth. The AUD fell back through 0.6850, marking new year to date lows at 0.6830.

With little of note on the domestic docket today we expect another largely rangebound session with risks skewed to the downside as risk sentiment continues to falter.

Key Movers

Traditional safe havens were the primary benefactors through trade on Thursday with both the Japanese Yen and Swiss Franc trending upward as investor nervousness sapped broader market demand for risk.

Sterling extended the weeks upturn and built on month long highs as the risk of a central bank rate cut continued to fade. A string of stronger than anticipated macroeconomic data sets have quelled calls for immediate Bank of England policy action with investors now pricing in a 50/50 chance of a rate cut next week, down from 70% on Monday. Having touched 1.3152 sterling edged marginally lower into the New York close as risk off sentiment swept the market. Attentions now turn to today’s manufacturing and services PMI prints as the last key data piece prior to the January 30 BoE policy meeting.

The Euro trended lower following the ECB policy meeting and pricing review announcement. While the Lagarde and her policy setting committee left rates and QE unchanged they announced a wide sweeping policy review. With rates unlikely to change in the near term the Euro consolidated moves below 1.11 as a dip in consumer confidence compounded moves. Having touched 1.1035 the Euro opens this morning at 1.1055

Expected Ranges

AUD/USD: 0.6810 - 0.6880 ▼

AUD/EUR: 0.6150 - 0.6230 ▲

GBP/AUD: 1.8750 - 1.9350 ▼

AUD/NZD: 1.0290 - 1.0480 ▼

AUD/CAD: 0.8950 - 0.9050 ▼