AUD – Australian dollar
Price action was somewhat sedated through Thursday as data points offset one another, and markets appeared content in simply monitoring positions. Employment data out yesterday surprised investors as the participation rate edged higher and job creation grew nearly four times faster than anticipated. While the unemployment rate edged back up to 4%, 56,300 new jobs were added to the economy through December, well above consensus estimates of 15,000. The data re-enforced the November print, confirming labour conditions remain tight, amplifying calls for the RBA to hold off on any impending rate cut. The stronger print and potential for a delay in RBA policy change did little to bolster the embattled AUD. The currency bounced between US$0.6195 and US$0.6240 and opens this morning bang in the middle at US$0.6210.
Direction continues to be driven by US rate expectations, uncertainty surrounding US tariffs and China economic performance. With that in mind, we look to China Q4 GDP numbers later today. We expect an improvement in activity after sluggish numbers through the middle of the year and an annual growth rate just short of the 5% target. A miss will likely weigh on the yuan and could force the AUD back below US$0.62.
Key Movers
The US dollar maintained a narrow range as comments from Fed policy members offset stronger than expected retail sales data. Consumer spending was solid through December and reinforced sustained US exceptionalism. The dollar enjoyed a brief uptick following the print, before Fed member Waller suggested the Fed may move rates sooner than markets expect. US yields fell and the dollar edged lower. Most majors tracked a narrow range with the GBP and euro drifting sideways. The CAD however was a notable underperformer, down near 0.4% as the looming threat of tariffs continues to cast a pall over Canada’s export market. Some $150billion of Canadian exports could be subject to US imposed tariffs. On the flip side, the JPY lead gains across the board, up 0.8% as Bank of Japan deputy Himino supported a rate hike at next week’s meeting. Overnight, the swap market now has now priced in a 25 point hike for next week, helping the yen force the dollar back below 155.50.
Our attentions today turn to China GDP and activity data, UK retail sales, US housing starts and US industrial production data.
Expected Ranges
AUD/USD: 0.6150 – 0.6250 ▼
AUD/EUR: 0.5980 – 0.6050 ▼
GBP/AUD: 1.9500 – 1.9800 ▲
AUD/NZD: 1.1020 – 1.1120 ▼
AUD/CAD: 0.8900 – 0.9000 ▲