Sterling Australian Dollar Predicted to Maintain Upside, But Aus Dollar Rates Suffer on Chinese Eco-Nnews
- Written by: Gary Howes
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The Aus dollar exchange rate complex (AUD) has today been hit by risk-off news out of China.
China's central bank signaled that volatility in interest rates would continue and cost of borrowing would rise. In a strongly worded statement, the PBoC said “When the valve of liquidity starts to tame and curb excessive credit expansion, money-market rates, or the cost of liquidity, will reflect that.”
The result has seen lower Aus dollar exchange rates:
- The Sterling Australian dollar exchange rate is 0.2 pct higher on a day-to-day basis at 1.8359.
- The euro to Australian dollar exchange rate is 0.34 pct higher at 1.5271.
- The Australian dollar to US dollar exchange rate is 0.34 pct lower at 0.8928.
Note: All AUD quotes here refer to the wholesale spot market. Your bank will charge a spread at their discretion when passing on a retail rate. However, an independent FX provider is so well placed on the market that they are able to deliver you up to 5% more currency. Please learn more here.
Australian dollar predictions
Analysts continue to see upside potential in the Australian dollar with predictions for further gains to come.
We remind readers of the possibility of a recovery to the tune of 4% from recent lows as suggested here.
"The AUD/USD ticked lower to start this week’s trade, but the lack of market-moving news has kept the move relatively contained. For today and the rest of this week, we will keep a close eye on support at the Fibonacci retracements of last week’s rally, starting at .8880 (38.2%) and .8810 (61.8%)," says Matt Weller at GFT.
Lloyds Bank Research are also bullish in the near-term:
"The AUD should still have some short term upside potential helped by the decline in yields in the US, firmer equities, short AUD positioning and the RBA’s neutral stance. Option strikes near 0.8950 may have held it back on Friday, but there should be scope for a recovery above 0.90 near term."
However, today's Chinese news reminds us of how vulnerable the AUD may be. Sean Lee at ForexTell warns the outlook for the Australian dollar could be choppy:
"Price was choppy towards the end of the week but the Ichimoku charts might provide some reasons for this.
"The Aussie broke up through the 4hr Cloud during the week but is currently sitting just under the bottom edge of the Cloud on the daily chart. This is a clear resistance zone for the Aussie and, hence, the choppy price action at the end of the week as it navigates this region."
Weak US Payrolls support AUD/USD
The weaker-than-expected US non-farm payrolls release was the key driver of markets on Friday night and the impact on FX is still being felt.
US Treasuries rallied slightly across the curve but the most pronounced moves were in the belly of the curve.
US equities, however, took the result in their stride with the S&P 500 finishing the session 1.3% higher.
"The result was USD negative with AUD/USD initially spiking to just shy of USD0.90 but this move was later unwound," say ANZ Research.
The increase in US payrolls employment was again well below market expectations in January.
Non-farm payrolls rose 113k against expectations for a 180k increase.
November was revised up to +274k but the weak December print was left basically unchanged at 75K. Sectors that shed jobs were government (-29K), retail (‑14K) and finance and insurance (-8K). Poor weather appeared to be less of a driver of the result than in December, with the household survey “not at work due to bad weather” series remaining relatively benign.
In addition, construction jobs, which are normally adversely affected by severe weather, added 48K. Despite the lacklustre jobs number, the separate household survey showed stronger employment growth and the unemployment rate eased to 6.6% (the participation rate rose 0.2ppts to 63.0%).
"The data overall do suggest that jobs growth has lost some momentum but owing to weather distortions it is still difficult to get an accurate read," say ANZ Research.
