The Australian dollar is rallying ahead of key jobs data

  • The Australian dollar rallied in late trade on Wednesday, helped by a rebound in US stocks and renewed optimism over a potential Brexit deal.
  • The British pound was extremely volatile, and influential on broader currency moves against the greenback.
  • Australia’s October jobs report will be released today. The economic calendar elsewhere is also busy, especially in Europe and the United States.

The Australian dollar pushed higher in late trade on Wednesday, finding support from a rebound in US stocks and renewed optimism over a potential Brexit deal.

Here’s the scoreboard at 8am in Sydney on Thursday.

AUD/USD 0.7239 , 0.0022 , 0.30%
AUD/JPY 82.16 , 0.02 , 0.02%
AUD/CNH 5.0260 , 0.0132 , 0.26%
AUD/EUR 0.6392 , 0.0001 , 0.02%
AUD/GBP 0.5562 , -0.0001 , -0.02%
AUD/NZD 1.0647 , -0.0018 , -0.17%
AUD/CAD 0.9584 , 0.0033 , 0.35%

Ray Attrill, Head of FX Strategy at the National Australia Bank, said the main story of the session was the wild swings in the British pound on Brexit speculation.

“It’s been a wild couple of hours with markets wracked by uncertainty as to whether the UK Cabinet would endorse the 500-page Brexit Withdrawal Agreement stitched together the day before and whether UK PM Theresa May would imminently face a leadership channel,” he said.

“The uncertainty factor had earlier weighed on broader market risk sentiment, hence US stocks and bond yields have pulled back up somewhat on news of Cabinet agreement to the proposed deal.”

Underlining just how volatile the pound was during the session, the GBP/USD traded in a range between 1.2886 to 1.3071, nearly 300 pips.

The swings in the pound were influential on broader market moves, helping to boost risk assets in the latter parts of the session — including the Australian dollar — to the detriment of the greenback.

Despite German and Japanese economic growth contracting in the September quarter, both the euro and Japanese yen also rallied against the US dollar.

While the late rally in US stocks fizzled in the close, the earlier bounce, along with a modest bounce in crude oil futures on speculation of a production cut from OPEC and its allies when they meet in early December, helped the AUD/USD to sit at .7239 with a hour left to trade.

AUD/USD Hourly Chart

Turning to the day ahead, whether the Aussie dollar move can be sustained will likely be determined by the release of Australia’s October jobs report at 11.30am AEDT.

Markets are looking for employment to increase by 20,000, although that’s not expected to be enough to prevent the unemployment rate lifting to 5.1%.

This 10-second guide has more on what to look out for in this important release.

RBA Governor Guy Debelle will also participate in a panel discussion at 1pm AEDT that will assess the “Effects of Housing Lending Policy Measures”. Given the focus on the housing market, Debelle’s remarks will naturally attract plenty of attention.

Markets will also be on the lookout for any remarks on wages and labour market conditions given recent data flow.

Outside of Australia, other data highlights today include Chinese new home prices, UK retail sales, Eurozone trade along with jobless claims, retail sales, business inventories, trade prices and manufacturing activity gauges from Philadelphia and New York from the United States.

On the central bank front, Powell, Bostic and Quarles from the US Fed, Coeure and Praet from the ECB and Tenreyo from the BoE are all scheduled to be in action.

Given the influence that Brexit negations and stocks continue to have on sentiment levels, they too could dictate broader market direction.