Australian Dollar Under Pressure vs Euro, Pound and USD But Markets Will be Coy to Push AUD Too Far

The Aus dollar exchange rate complex (AUD) is has witnessed an interesting week of gains and losses making life difficult for those trying to pick the market.

The Aussie dollar shrugged off poor local jobs data and managed to keep above $0.8700, its highest in two weeks. However, all indications are currently pointing to AUD cementing its place as the week's second worst performer in the G10 space as we head to Friday's close. 

"A sense that the Fed may wait longer before raising borrowing rates helped unleash a strong rally for risky assets such as the high-yielding Aussie. But the Antipodean currency’s fundamentals appeared increasingly in doubt after Australia reported an unexpected loss of 29,700 jobs in September compared to forecasts of a net gain of 20,000," says Joe Manimbo at Western Union.

It is widely expected that Australian employment data will be revised down - this will reaffirm the view that the economy is starting to under-perform and adds to anxieties as to what the next steps at the Reserve Bank of Australia will be.

Australian Dollar Rates Today:

• The euro to Australian dollar exchange rate (EUR/AUD) is 0.26 pct higher; the conversion rate is 1 EUR = 1.4489 AUD.
• The pound to Australian dollar exchange rate (GBP/AUD) is 0.21 pct higher; the conversion rate is 1 GBP = 1.8392 AUD.
• The Australian to US dollar exchange rate (AUD/USD) is 0.71 pct lower; 1 AUD = 0.8721.

Beware: The above are spot market quotes, your bank will affix a discretionary spread to the figures. Note that an independent FX provider is able to provide up to 5% more currency in some cases by getting closer to the market, learn more here.

What is Keeping the Australian Dollar Under Pressure?

The Australian Bureau of Statistics has announced an issue with the seasonal adjustment was to blame for August outsized +121K employment gain.  

The unadjusted Aug employment increase was +32.1k, and the ABS has advised they will use NSA data for July, Aug, as well as Sep in tomorrow's employment report.  

"Australia’s job market though appears to be working its way through much seasonal noise as the massive employment gains in August of 121,000 got revised sharply lower to an increase of 32,100. Short term gains may prove tougher to sustain for the Aussie since the nation’s central bank this week still considered its value on the high side from a historical perspective," says Manimbo.

Furthermore, the Chinese economy appears to be a worry for the Australian currency at the present time.

Beware of the Corrective Bounce Higher

While the Aussie dollar may be under pressure at the present time, we should not discount further corrective climbs.

Keep an eye on the US dollar - if it hits a period of weakness you can bet the Australian dollar will find its feet once more.

This is a view echoed by Adam Myers at Credit Agricole:

"Stable RBA monetary policy expectations should leave the AUD driven by external factors such as global risk sentiment and Fed monetary policy expectations.

"This is especially true as the central bank appears to be somewhat less cautious when it comes to the currency’s high valuation.

"Although the central bank still regards the AUD as being high by historical standards it refrained from calling it overvalued according to most fundamental estimates.

"Looking ahead, we anticipated further upside correction risk. First of all we see scope of Fed speakers sounding more cautious this week.

"This is mainly due to a high USD’s dampening impact on inflation expectations, which have been falling during the past few weeks.

"Accordingly we advise against selling AUD/USD around the current levels."