Australian dollar steadies before tonight's key US payrolls report

Photo by Brian Carlin/Team Vestas Wind via Getty Images

The Australian dollar did next to nothing overnight, meandering in a thin range of less than 50 pips as markets settled into a holding pattern before tonight’s key US non-farm payrolls release for October.

Given weakness across the commodities complex overnight, particularly in Australia’s key commodity export iron ore, it was an impressive performance from the Aussie, and indicates that investors had bigger events on their minds when it came to taking on fresh trading positions.

As at 8.30am AEDT, the AUD/USD currently buys .7143, largely in line with Thursday’s opening level of .7146

Looking ahead to Asia’s trading session, markets will have to navigate the the release of the quarterly statement on monetary policy from the RBA at 11.30am, including key economic forecasts. Beyond that, all eyes will be on the US non-farm payrolls report for October, a release that has the potential to lay the groundwork for an increase in US interest rates in December.

Again, it’s another busy 24 hours as far as the schedule is concerned,” wrote NAB senior economist David de Garis in his morning note.

“First up today, the RBA releases its Statement on Monetary Policy, revealing some likely downward revision to its near-term inflation forecasts, if only from base effects and trimming its medium to longer term potential growth forecasts from slower population growth. As well the forecasts, the market will be looking for any nuances in the forward guidance as any influence over the market’s current pricing of December being unlikely and next February as possible to probable. (We continue to expect that the RBA will remain on hold for many months yet.) We also have Malcolm Edey RBA Assistant Governor (Financial System) speaking at noon AEDT at a property conference on the Gold Coast.”

Given markets expect only small tweaks to the RBA’s underlying inflation and GDP growth forecasts for the end of fiscal year 2015/16 – the former slightly lower and the latter fractionally higher – it will have to take an outlier in the forecasts to garner a market reaction of any significance. The November monetary policy statement, along with Glenn Stevens’s speech yesterday, have bolstered expectations that while the near-term outlook for interest rates is steady, risks are still slanted to the downside.

Beyond the RBA’s SOMP, it’ll be all about one thing: waiting for the US jobs report.

“(Tonight) it’s all pretty much about payrolls, with the likelihood of a print anywhere near close to expectations underpinning current pricing tilted towards fed rate lift-off in December,” says De Garis.

Markets expect payrolls growth of 180,000 with the unemployment rate tipped to hold steady at 5.1%. Average hourly earnings, a crucial component of the release given its implications for future inflationary trends, is forecast to rise 0.2% leaving the annual rate unchanged at 2.2%.

Here’s the current Aussie dollar scoreboard.

  • AUD/USD 0.7143 , -0.0003 , -0.04%
  • AUD/JPY 86.95 , 0.10 , 0.12%
  • AUD/CNY 4.5329 , 0.0054 , 0.12%
  • AUD/EUR 0.6566 , -0.0009 , -0.14%
  • AUD/GBP 0.4696 , 0.0053 , 1.14%
  • AUD/NZD 1.0801 , -0.0026 , -0.24%

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