The Australian dollar fights back

Australian boxer Danny Green. Photo: Getty Images

After copping a hammering on Wednesday morning following news Westpac will increase variable mortgage rates by 20 basis points in late November, something that saw expectations for further interest rate cuts from the RBA increase, the Australian dollar found its footing overnight, rising strongly against its US namesake on the back of weak economic data from the US, stability in the iron ore price and further strength in gold.

As of 8.30am AEDT the AUD/USD currently buys .7303, a full cent higher than where it was trading yesterday morning. While it rose strongly against the US dollar, it underperformed against other major pairs, particularly the New Zealand dollar and UK pound.

AUD/USD 5-Minute Chart

Looking ahead to today, movements in the Aussie will be dominated by one thing – Australia’s September jobs report, released at 11.30am AEDT.

According to Ray Attrill, NAB’s global co-head of FX strategy, markets should brace for volatility.

“The Australian labour market release is traditionally a significant market mover for both the AUD and short dated yields,” he wrote this morning.

Heading into the release, Attrill suggests that risks for an outsized market move in the Aussie may be skewed to the upside given increased expectations that Westpac’s move will pressure the RBA to cut interest rates further.

“Since yesterday’s move on mortgage rates by Westpac saw market pricing for the RBA move to price one rate cut before March next year (from April previously) and in total over 42bps of cuts (from 35bps) then a weaker than expected employment outcome would doubtless play with the grain of this view, though with so much now priced into the rates market, it will like to take an particularly weak report to produce much by way of fresh AUD downside or still-lower yields,” Attrill said.

“On the contrary, a strong report should set these expectations back somewhat, so perhaps there’s more upside on a strong report than vice versa.”

The NAB expects employment growth of 11,000 — above the 7,100 median market forecast expected by the markets — with unemployment tipped to remain steady at 6.2%.

Here’s the Aussie dollar scoreboard.

  • AUD/USD 0.7303 , 0.0007 , 0.10%
  • AUD/JPY 86.71 , 0.02 , 0.02%
  • AUD/CNY 4.6346 , 0.0044 , 0.10%
  • AUD/EUR 0.6359 , 0 , 0.00%
  • AUD/GBP 0.4718 , 0.0005 , 0.11%
  • AUD/NZD 1.0752 , 0.0015 , 0.14%

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