It’s been a tough twenty-four hours for the Australian dollar.
The “Aussie” was hammered after Thursday’s woeful retail sales data, which showed that sales declined in August by 0.6% – the biggest fall in four years. To add insult to injury, previously released data for July was revised down to -0.2%, from 0.0%.
AUD/USD has fallen by the hour since the sales report, assisted by moderately hawkish comments from regional Fed presidents John Williams and Patrick Harker, which helped the US Dollar Index climb to a seven-week high of 93.99. By 03:30 GMT on Friday, the Australian dollar had fallen more than a cent against its American counterpart to a twelve-week low of $0.7748, from $0.7861 prior to the release of sales data.
AUD/JPY shared the same fate as AUD/USD, falling from levels around ¥88.70 to ¥87.45 on Friday morning.
AUD/CNY fell from ¥5.23 to ¥5.155.
Due to underlying New Zealand dollar weakness, the Australian dollar lost only half as much in relative terms against the “kiwi.” AUD/NZD’s fall from 1.0985 to 1.0917 did little to put off the technical research team at National Australia Bank, who said on Thursday that they were still targeting 1.14 in the pair – an exchange rate not seen since 2015.
Foreign exchange traders should expect a period of calm in the coming hours ahead of all-important US payrolls data.
Hurricanes Harvey and Irma likely slowed job creation in September and, consequently, Friday’s payrolls figure is expected to print only +82,000; well below the 150k-250k bracket of monthly jobs growth that traders have become accustomed to over the past few years. Any print above 100,000 would likely see the Australian dollar dip again versus USD.
Economists are also looking for a pick-up in US hourly earnings, which would indicate to decision makers at the Federal Reserve that US employment levels are at or near their maximum and that monetary policy stimulus can be further removed. The median-estimate for September’s earnings growth is +0.3%, from +0.1% in August.