The Australian dollar is weaker. And no, it's not because of S&P

Christian Petersen/Getty Images

The Australian dollar fell modestly overnight, weighed down by a steep decline in crude oil prices, modest US dollar strength and selling against the New Zealand dollar.

It was not in response to Standard and Poor’s decision to place Australia’s AAA sovereign credit rating on watch for a potential downgrade.

Slumping crude prices was the chief catalyst behind the Aussie’s weakness, closing the session down 4.7% following the release of US inventory data from the EIA which revealed a smaller-than-expected draw down in both crude and gasoline stores.

A strong ADP private sector payrolls report in the US also helped to boost the US dollar, providing confidence before the release of the June non-farm payrolls report on Friday.

The Aussie also came under pressure due to a soaring New Zealand dollar, with traders switching out out of the former to buy the latter as expectations for a New Zealand rate cut next month dimmed.

A key speech delivered by RBNZ deputy governor Grant Spencer on Thursday failed to disclose any additional macroprudential measures to cool New Zealand’s hot housing market, dashing hopes of a further rate cut from the RBNZ.

He also stated that “further reductions in the OCR [overnight cash rate] could pose a risk to financial stability through their effect on credit growth and house prices”. Over Thursday’s trading session, the AUD/NZD lost 1.82%.

As a result of these three factors, among other, the AUD/USD eventually closed the session buying .7477, down 0.51% from Wednesday’s closing level.

AUD/USD 5-Minute Chart

Turning to today’s Friday session in Asia, there is yet again little going on from either an event or data perspective.

With nothing on the calendar that’s likely to upset the apple cart, it’s likely to be a quiet session of trade in Asia as markets await the release of the US non-farm payrolls report for June at 10.30pm AEST.

“The market is expecting a rise in headline payrolls of 180,000 and an unemployment rate of 4.8% after May’s 4.7% reading, that consensus payrolls growth is looking a tad ambitious,” says David de Garis, senior economist at the NAB.

“The market will also be keenly interested in earnings that are expected to have risen another 0.2% m/m, lifting annual growth from 2.5% to 2.7%.

“It’s going to require a clearly strong report tonight (and for the next month or two) to convince the market that a near term rate hike looks reaslistic,” he adds.

Here’s how the Aussie is trading against the crosses, as at 7.45am AEST.

  • AUD/USD 0.7478 , 0.0001 , 0.01%
  • AUD/JPY 75.33 , 0.00 , 0.00%
  • AUD/CNH 5.0104 , 0.0004 , 0.01%
  • AUD/EUR 0.6759 , 0.0003 , 0.04%
  • AUD/GBP 0.5790 , -0.0001 , -0.02%
  • AUD/NZD 1.0363 , 0.0021 , 0.20%

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