The Australian tumbled overnight, undermined by broad based US dollar strength before tonight’s US non-farm payrolls for September.
Having opened Thursday’s trade buying .7620, the AUD/USD was under pressure from the get-go in Asia with selling intensifying during European trade. It eventually hit a low of .7559 before rebounding modestly towards the close.
Technical selling, along with another strong US data release — this time initial jobless claims — contributed to the weakness in the Aussie.
10-year US treasury yields continued to lift, rising to a one-month high of 1.74% which helped to support the US dollar. Expectations for a US rate hike from the Fed also rose with the likelihood of a 25 basis point increase now seen as a two-in-three chance.
As at 7.45am AEDT, the AUD/USD buys .7583. It is currently trading at a two-week low.
Looking ahead to Friday’s trading session, it’s going to be a tale of two halves, borrowing from a well worn cliche.
The first half will almost certainly be boring, including the entirety of the Asian session, while the latter will be hectic, likely delivering some of the wildest price action seen at any point in the past month.
The reason for this is simple: there’s next to no economic data out in Asia, the exact opposite to what we’ll see later in the session with the release of US non-farm payrolls for September, perhaps the most important economic release for markets each and every month.
According to Daniel Been, head of FX strategy at ANZ, a weaker-than-expected payrolls report will likely create the largest movement in the US dollar, hence the Aussie, given increased optimism that the Fed will hike interest rates in December.
“We question the upside to Fed pricing and the USD in the event of a strong number given markets already put the chance of a December hike at approximately 60%,” says Been. “Hence, we would expect a larger move in the USD on a weak number.”
This primer from BI’s Akin Oyedele has all the information you need to know ahead of the payrolls release.
Outside of the payrolls report, markets will also hear from Fed members Fischer, Mester, George and Brainard.
Here’s the current Australian dollar scoreboard as at 7.45am AEDT.
- AUD/USD 0.7583 , -0.0039 , -0.51%
- AUD/JPY 78.84 , -0.01 , -0.01%
- AUD/CNH 5.0847 , -0.0186 , -0.36%
- AUD/EUR 0.6799 , 0.0002 , 0.03%
- AUD/GBP 0.6012 , 0.0036 , 0.60%
- AUD/NZD 1.0577 , -0.0034 , -0.32%