It’s likely to be a dull Asian session for Aussie dollar traders

Photo: Getty Images.

The Australian dollar weakened overnight, especially against the Euro and British pound.

Here’s the scoreboard as at 8am AEST.

AUD/USD 0.7581 , -0.0004 , -0.05%
AUD/JPY 85.79 , -0.07 , -0.08%
AUD/CNH 5.1536 , -0.0038 , -0.07%
AUD/EUR 0.6638 , -0.0001 , -0.02%
AUD/GBP 0.5845 , -0.0002 , -0.03%
AUD/NZD 1.0418 , -0.0002 , -0.02%

While the Aussie lost 0.2% against the US dollar, closing the session at .7585, the most severe losses came against the euro with the AUD/EUR tumbling over 0.8%.

That was in response to further hawkish commentary from the European Central Bank, this time in the minutes of the bank’s June monetary policy meeting.

“The ECB considered ‘revisiting the easing bias with respect to the APP purchases, whereby the Governing Council signalled its readiness to increase the pace and/or duration of the asset purchases if necessary’,” said Elias Haddad, senior currency strategist at the Commonwealth Bank.

“This reinforces our view the ECB will taper the current €60 billion per month asset purchase programme (APP) by €10 billion per month starting in January and finishing in June 2018.”.

The hawkish commentary was certainly felt across financial markets. The euro was the top performing G10 currency overnight while 10-year German bund yields hit 0.558%, the highest level since January 2016.

The Aussie also lost ground against the British pound, again on the back of hawkish central bank speak.

“Comments from Bank of England policy maker Ian McCafferty offered GBP some support,” said Haddad. “McCafferty noted the BoE may need to take a little bit of the current stimulus away.”

While they clearly supported the pound, Haddad says that his comments were not surprising given he voted for a rate hike at the BoE’s June meeting.

The spike in global bond yields and large losses in global stocks also undermined the Aussie, ensuring it remained under pressure during the session.

AUD/EUR Hourly Chart

After sliding on Thursday, the Aussie dollar looks set to enter a holding pattern today ahead of the release of US non-farm payrolls for June later in the session.

Before that event arrives there’s absolutely no market moving data or events scheduled that appear likely to move the Aussie one way or another.

Asian trade is likely to be dull as a consequence, just as it as been in the past few sessions. Everyone is waiting for the payrolls report to arrive, and there’s nothing much to focus on beforehand.

In terms of the US jobs report, markets expect payrolls to increase by 178,000 with the unemployment rate tipped to remain steady at 4.3%.

“The Atlanta Fed’s jobs calculator suggests only 118,000 jobs a month are needed to keep the unemployment rate unchanged, so anything above this will be probably enough for the Fed,” says Tapas Strickland, economist at the National Australia Bank.

Strickland says there’ll be plenty of interest on average hourly earnings given they have risen very little despite the unemployment rate continuing to fall.

Markets are expecting an increase of 0.3% for the month, leaving the annual growth rate at 2.6%.

The report will be released at 10.30pm AEST.

Before the payrolls report arrives markets will also receive trade, house price and industrial production data from the UK along with industrial output figures from Spain and Germany.

It’s arguable just how much markets will react to these releases ahead of the payrolls report.

Canada will also release jobs figures for June. While these usually get lost in the chaos that usually accompanies the US payrolls report, this release is likely to garner more attention than usual given widespread expectation that the Bank of Canada is about to hike interest rates, more than likely arriving next week.

Markets are looking for an increase in employment of 10,000 leaving the unemployment rate steady at 6.6%.