It’s been a quiet start for the Australian dollar this morning with the AUD/USD falling fractionally in early Asian trade.
Just after 8am AEST the AUD/USD buys .7013, down 0.09% on Friday’s closing level.
Today the regional calendar is sparse, although that won’t remain the case as the week evolves. As Joseph Capurso, senior currency strategist at CBA, points out in a note this morning, the Aussie is likely to remain supported on the back of upcoming economic data and next week’s RBA October monetary policy meeting.
“We expect AUD to be supported by a more cautiously optimistic RBA after its policy meeting on Tuesday and solid Australian building approvals and Australian retail sales. High levels of home building and a pickup in consumer spending are part of the RBA’s (perhaps premature) cautious optimism about a successful transition towards non-mining investment growth drivers,” notes Capurso.
Despite this, he suggests the factors that have been driving the AUD/USD lower in recent months remain intact.
“The fundamentals pushing AUD/USD lower remain in place: (i) under-pricing of FOMC rate tightening, (ii) a shrinking AU-US two swap spread, and (iii) lower commodity prices. A pickup in volatility and weakness in global equity markets are also helping to bear down on AUD”.
Aside from local Australian data, Capurso believes the US non-farm payrolls report for September, released on Friday, should help underpin the US dollar despite likely weakness in the US manufacturing PMI report released on Thursday.
“USD takes centre stage in what is likely to be a choppy week. The regional manufacturing surveys point to large downside risks to consensus estimates for the ISM. But the USD and US rates should end the week higher because non-farm payrolls are likely to snap back from August’s weak number”.
Alongside the heavy US data calendar, he is also watching developments regarding the US government debt ceiling negotiations in Washington.
“A left field influence on the USD this week is the 30 September deadline to increase the debt ceiling on the US Federal government. We expect a last minute agreement to increase the debt ceiling but failure to increase it (very unlikely) would increase volatility and sap global equity markets”.
The full Australian dollar scorecard is found below.
- AUD/USD 0.7013 , -0.0006 , -0.09%
- AUD/JPY 84.53 , -0.11 , -0.13%
- AUD/CNY 4.4699 , -0.0051 , -0.11%
- AUD/EUR 0.6265 , -0.0008 , -0.13%
- AUD/GBP 0.4613 , -0.0011 , -0.24%
- AUD/NZD 1.1001 , 0.001 , 0.09%
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