The Australian dollar is under pressure ahead of today's key US jobs report

Jeff J Mitchell/Getty Images
  • The Australian dollar weakened on Thursday despite an apparent lessening in trade war fears.
  • Broader market movements suggest profit-taking ahead of the US non-farm payrolls for March may have been a factor.
  • There is little economic data scheduled in Asia, and Chinese markets are closed, likely ensuring a quiet session of trade on Friday ahead of the release of the US jobs report.

The Australian dollar meandered its way through Thursday’s trading session, a performance largely reflecting tweaks to positioning ahead of Friday’s key US non-farm payrolls release.

Here’s the scoreboard as at 7am AEST.

AUD/USD 0.7685 , -0.0031 , -0.40%
AUD/JPY 82.52 , 0.14 , 0.17%
AUD/CNH 4.8333 , -0.016 , -0.33%
AUD/EUR 0.6278 , -0.0006 , -0.10%
AUD/GBP 0.5487 , 0.0008 , 0.15%
AUD/NZD 1.0566 , 0.0008 , 0.08%
AUD/CAD 0.9792 , -0.0053 , -0.54%

After opening above the 77 cent level, the AUD/USD began to reverse midway through Thursday’s Asian trading session, driven largely by broad-based US dollar strength rather than any fundamental factors.

One popular narrative to explain the greenback’s strength was an apparent moderation in trade war concerns, something that was said to help boost US bond yields and stocks during the session.

While that may be so, Ray Attrill, Head of FX Strategy at the National Australia Bank, said it was unusual that the Aussie dollar didn’t benefit from the apparent lessening of concern given it had been hit harder than most by trade war fears in prior sessions.

“The in currency markets is that the AUD is down by 0.4% despite the fact the Aussie has been the currency that has been among the worst affected by rising fears about a Sino-US trade war,” he said.

“Commodity prices are also slightly higher for the most part, typically AUD-supportive.”

Attrill says that suggests the move on Thursday was “mostly just a US dollar thing”.

Market positioning in the US dollar is still very short, something that may explain the sudden strength in the greenback ahead of today’s US non-farm payrolls report. US stocks have also been hammered in recent weeks, and bonds have been bid up strongly, suggesting that the partial reversal of those moves on Thursday were also driven by profit-taking.

Further supporting that view, markets overlooked news that the US trade deficit widened to the highest level in close to a decade in February. Previously, such news tended to result in US dollar weakness.

AUD/USD Hourly Chart

With Chinese markets still off on holiday and no major economic data scheduled in Asia, Friday’s trading session looks set to be a quiet one ahead of the US payrolls release.

Given strength in payrolls is now taken as a given, market moves will likely be determined by the average hourly earnings figure and, to a lesser degree, the US unemployment rate.

“Average hourly earnings are seen rising back to 2.7% from 2.6% with unemployment falling to 4.0% from 4.1%,” says Attrill.

Payrolls are tipped to increase by 185,000, although Attrill says the risks for this number are slanted to the upside given strength in alternate labour market indicators released for February.

The payrolls report will be released at 10.30am AEST.

Outside of that report, the other main highlight comes from Canada with the release of unemployment data for March. Employment is seen increasing by 20,000 leaving the unemployment rate steady at 5.8%.

US Fed Chair Jerome Powell, along with incoming New York Fed President John Williams, will also speak during the session.

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