The Australian dollar remains under pressure

Jeff J Mitchell/Getty Images

The Australian dollar remains below the 77 cent level, undermined by the release of Australia’s September retail sales report on Friday which came in well below expectations.

Here’s the scoreboard as at 8.05am AEDT.

AUD/USD 0.7651 , 0.0001 , 0.01%
AUD/JPY 87.25 , 0.02 , 0.02%
AUD/CNH 5.0767 , 0.0007 , 0.01%
AUD/EUR 0.6585 , -0.0003 , -0.05%
AUD/GBP 0.5853 , 0.0007 , 0.12%
AUD/NZD 1.1064 , -0.0007 , -0.06%
AUD/CAD 0.9765 , 0.0007 , 0.07%

Having opened the session at .7712, the AUD/USD was hammered back below 0.7700 following the release of the retail sales report with the flat outcome casting renewed doubt over the health of household finances.

From there the Aussie continued to grind lower over the second half of the session, only briefly interrupted by the release of US non-farm payrolls for October which offered a mixed reading on current labour market conditions.

Payrolls rose by 261,000, below the 313,000 level expected, although that was partially offset by a 90,000 upward revision to prior payrolls growth.

Thanks largely to a 0.4 percentage point decline in labour market participation to 62.7%, the US unemployment rate dipped to 4.1%, the lowest level since December 2000. However, despite signalling that job market conditions are tightening, it was not enough to spur on wage pressures with average hourly earnings coming in flat over the month, below the 0.2% increase expected.

While that initially acted to weaken the US dollar, and boost the AUD/USD, those moves were entirely unwound following the release of a strong US ISM non-manufacturing PMI report for October later in the session.

“USD ended Friday‚Äôs overnight session on a firmer tone against most major currencies supported by a solid increase in the US ISM non manufacturing index,” said Elias Haddad, senior currency strategist at the Commonwealth Bank.

“The US ISM non manufacturing index surged to 60.1 in October, the highest level since August 2005, consistent with further robust expansion in US economic activity.”

That ensured the Aussie dollar remained under pressure, eventually closing the session at .7650.

AUD/USD Hourly Chart

The Aussie also lost ground against most major currency pairs, especially the UK pound along with the Canadian and New Zealand dollar’s.

Turning to the session ahead, it’s likely to be a quiet one in Asia with most of the major economic data points arriving later in the week.

Domestically, Australian job ads data for October will be released at 11.30am AEDT.

Outside of Australia, data highlights include German industrial orders, services PMI’s from Europe and eurozone investor sentiment.

Given the quiet data calendar, Rodrigo Catril, currency strategist at the National Australia Bank, says that politics appears the most likely catalyst create some volatility across markets.

“President Trump visits Asia, including Japan, China and South Korea where he addresses the National Assembly on Wednesday, an event sure to be followed closely,” he says.

“US Tax reform is also going to be a focus with the House Ways and Means Committee is expected to mark up the bill and allow amendments from Monday with a vote pencilled in for the following week. Meanwhile the Senate is expected to release its own version of a tax bill on Wednesday.

“The degree of differences between the two bills will set the tone in terms of tax reform expectations,” he adds.

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