AUDUSD to 6-Week Lows After Strong US Data
AUD
The AUD lost ground on all fronts barring the NZD this morning with commodities and US Equity Indices all taking losses. High-flying Copper and Iron Ore both took a step back with Copper losing -2.7%, Iron Ore down -2.2%, and Gold flat. The US Equity indices Dow Jones lost -0.1%, S&P 500 -0.3%, and the NASDAQ was the biggest loser losing -1.0%. Local monthly Retail Sales came in bang on expectations at 1.1% so did not lend support to the AUD. It’s quiet day ahead on the Australasian calendar with market attention firmly focused on the barrage of US data that has been moving currency markets. Plenty of room for volatility tonight with the US Official Non-Farm Payrolls numbers due for release.
USD
The AUD/USD fell back into the 0.76s overnight trading at 0.7661 this morning. The theme of the session was Greenback strength with a variety of data out of the US coming in better than expected. ADP Non-Farm Employment Change came in at 978K, up from the forecasted 645K, shortly before the US Unemployment Claims also stronger with 385K, down from the forecasted 400K. To cap off the strong US Data, the ISM Services PMI also came in above expectations with a level of 64.0 against 63.0 forecasted. The upbeat US employment figures gives footing to tapering talks as the US Federal Reserve announces that it will begin winding down one of its programs which was designed to support the economy throughout the pandemic. Talks of tapering likely the reason why US Treasury yields marked the heaviest jump in three weeks, gaining 3.7bps to 1.63%, as the Wall Street indices couldn’t withstand the heavy US data. Markets will look to see if the strong run of data can continue with the Unemployment Rate, Non-Farm Employment Change, an Average Hourly Earnings m/m being released later tonight. But perhaps the most attention will be on Fed Chair Powell as he speaks tonight, and any hawkish commentary on the recent data could give insight on a timeline for rate changes.
EUR
The AUD/EUR also losing ground but still remaining in the 63s to trade at 0.6314 at time of writing. A data dump of service PMIs was released out of the Eurozone yesterday with Spain Services PMI rising to 59.4, beating expectations of 57.9. Italy followed suit, with Services PMI rising to 53.1 (52.3 expected). French and German Services PMI was in line with expectations of 56.6 and 52.8 respectively. Eurozone Services PMI beat expectations of 62, rising to 62.9. Strong Services PMI wasn’t enough to overshadow tapering talks out of the US as the EURUSD pair also plummeted to 1.2119, its lowest since mid-May. Little data coming out of Europe today, as the Eurozone turns to Thursday next week to see some headline data with CPI data and their Monetary Policy Statement.
GBP
The AUDGBP following the trend to sit at 0.5425 this morning. The British pound remained well supported against the AUD by the optimistic outlook for the UK economic recovery amid the gradual easing of lockdown measures. UK Prime Minister Boris Johnson reiterated that there is nothing in the data at the moment that a delay to fully end restrictions from June 21 would be necessary – though the usually confident PM has seemed more cautious after daily COVID-19 cases topped 4,000 and continue their uptrend.
NZD
The AUDNZD managed to buck the trend, as our Trans-Tasman counterparts felt the impact of Greenback strength harder than us, but not by much, to trade at 1.0716 this morning. Both AUD and NZD were pummelled by USD, the NZDUSD forced to one-month lows overnight. RBNZ Gov Orr is due to speak at 5pm this evening, which could lend support to the NZD if he expands on the risks of inflation identified by the RBNZ meeting last week.