Fed Taper Timeline Hinging on US Employment Data Tonight

AUD

Happy Friday Readers. The AUD continued its gains across all major currency pairs for the third consecutive day as risk appetite improved. Local Equities were mixed with the Shanghai Comp posting 0.8% gains, the Nikkei a modest 0.3% however the ASX underperformed -0.5% as resource companies weighed in heavy. Commodities were mixed with Iron Ore up 0.8% while Silver was down -1.0% and Gold posted minor losses of -0.2% to maintain it’s $1809/oz. Moving forward, the final reading of the Australia Retail sales for July is up for publishing today at 11:30am and is expected to improve from the precious -2.7% last month but to still show a contraction. While the risk-on mood may get an additional boost should the Aussie data improve, more likely market participants will sit on their hands ahead of the US non-farm payrolls due tonight which carries significant weight (see USD section below).

USD

The AUDUSD continued to make gains yesterday and climbed to 0.7409, reaching the highest level since August 5th before coming back down to trade at 0.7403 this morning. US Equities had a modest session with the Dow up 0.4%, the S&P up 0.3% and the Nasdaq was up 0.1% respectively. Oil was around 0.5% higher on the day with precious metals showing very modest gains and the US 10-year yields were a little lower and sitting just below 1.29%. In some early data overnight, the weekly US jobless claims were better-than-expected with initial claims down slightly to 340k to beat expectations of 345k while continuing claims fell from 2.908mio to 2.748mio to beat expectations of 2.808mio. To the main event tonight, the official monthly US employment data is due, markets of the opinion that this is the last hurdle to the start of the Fed's tapering program. Expectations are for 720k new jobs to have been created in August, however we're hearing that any number above 500k should be enough for the Fed to proceed with a tapering announcement as soon as next week. 

EUR

The AUDEUR pair also moving higher, trading as high as 0.6246 before retreating to 0.6234 at the time of writing. European Equities had little change and closed modestly higher with both the DAX and CAC up 0.1%. It was quiet on the data front overnight with the EZ PPI coming in at 2.3% for July, beating forecasts of 1.8%. There’s a flurry of data ahead this evening with the EU due to release the Eurozone Service & Manufacturing PMIs in addition to the EU retail sales for August.

GBP

The AUDGBP pair also making some positive moves as it trades at 0.5349 this morning, a fresh monthly high. The London Benchmark FTSE 100 edged higher in trade, closing up 0.2%. Investors have been watching the UK’s covid infection data. In the last week of August, Britain reported the highest number of new COVID-19 cases in just over a month which could be a headwind for the pound going forward. This morning, the UK recorded 178 coronavirus-related deaths and 38,154 new cases. Almost 80% of over-16s are now fully vaccinated, after a further 113,385 received the second dose of a COVID-19 vaccine. It comes amid warnings that infection rates will rise further in the coming weeks following the return of schools.

NZD

The AUDNZD bucked the trend to make a loss overnight, currently trading at a rate of 1.0408 this morning. In some early data yesterday, the NZ posted strong New Zealand trade data. The country’s export prices rebounded in the second quarter, rising from -0.8% to 8.3%. This was a stronger performance than the median estimate of 3.0%. At the same time, the exports volume rose by 2.9% after it dropped by 2.9% in the previous quarter. No local data for the Kiwi headed in to the weekend.