- The Australian dollar rallied hard on Friday, jumping to the highest level since late February against the greenback.
- The move was sparked by a weak US wage report for February, casting doubt over the need for more aggressive rate hikes from the US Federal Reserve this year.
- There are no major economic events scheduled for release on Monday.
The Australian dollar has opened the new week at the highest level since late February, holding on to all of gains following a breakneck rally on Friday.
Here’s the scoreboard as at 8am AEDT.
AUD/USD 0.7848 , -0.0001 , -0.01%
AUD/JPY 83.69 , -0.13 , -0.16%
AUD/CNH 4.9643 , -0.0012 , -0.02%
AUD/EUR 0.6373 , -0.0002 , -0.03%
AUD/GBP 0.5665 , -0.0001 , -0.02%
AUD/NZD 1.0754 , -0.0027 , -0.25%
AUD/CAD 1.0053 , 0 , 0.00%
At .7848, the AUD/USD currently sits at the highest level since February 27, rallying close to 0.8% on Friday following the release of what was widely described as a “Goldilocks” US jobs report for February for financial markets.
“Friday’s US payrolls report combined a big upside surprise on employment of 313,000 with another 56,000 of upwards revisions on top,” said Ray Attrill, Head of FX Strategy at the National Australia Bank.
Despite the surge in hiring, the unemployment rate held steady at 4.1%, above the 4% level expected, as labour for participation jumped by an unusually large 0.3 percentage points.
Average hourly earnings growth also underwhelmed, rising by just 0.1% for the month leaving the change on year earlier at 2.6%, below the downwardly-revised 2.8% level of January.
Combined, the jobs report was seen as a perfect outcome for markets with strong employment growth not leading to a lift in wage pressures, casting doubt over the need for the US Federal Reserve to lift interest rates as much as four times this year as some had started to speculate.
Attrill said that doubt over the outlook for US monetary policy did nothing to help the US dollar, helping to send risk assets — including the Aussie dollar — hurtling higher during the session.
“Fears of four rates hikes from the Fed this year have receded while risk sentiment is back firmly in the ascendency — for now at least,” he says.
“This turned recent mild headwinds into tailwinds for the AUD, making it the second strongest currency on the night on Friday and the best performing G10 currency on the week with a gain of just over 1%.”
Large gains in US stocks, along with the crude oil price, did nothing to deter buying in the Aussie despite some steep falls in iron ore and coal markets on Friday, Australia’s largest goods exports by dollar value.
Turning to the session ahead, there is nothing obvious on the economic events radar that appears likely to shift the Aussie significantly in one direction or the other on Monday.
There’s little on the economic calendar either domestically or abroad, likely ensuring that sentiment, technicals and headlines surrounding trade frictions between the US and other major nations will dictate overall direction today.
Given the pummeling on Friday, there’ll likely be a bit of attention on Chinese commodity futures when they resume trade at midday AEDT.
Traders will be also mindful that US consumer price inflation (CPI) figures for February will be released tomorrow, a report that carries the potential to add to or reverse the strong rally in risk assets seen following the US jobs report on Friday.