Australian dollar (AUD) exchange rate hit by strong USD, falling job vacancies data

The Australian dollar (AUD) has come under pressure on Wednesday in an environment of US dollar strength. Also weighing is the latest set of ABS job vacancies data.

A look at the global foreign exchange markets shows the Aus dollar to be under pressure:

• The pound sterling to Australian dollar (GBP/AUD) exchange rate is trading 0.27 pct higher on a day-to-day basis at 1.8428.
• The euro to Australian dollar exchange rate (EUR/AUD) is unchanged on last night's close at 1.5257.
• The Australian dollar to US dollar (AUD/USD) is 0.12 pct lower at 0.8917.

NB: All the above quotes are taken from the wholesale inter-bank markets. Your bank will affix a spread to the rate at their discretion when passing on a retail rate. However, an independent FX provider will guarantee to undercut your bank's offer, thus delivering more currency. Please learn more here.

US dollar strength

Weighing on the prices of commodities, and thus by extension the Australian dollar, today is a broadly stronger US dollar.

There was no overt trigger to the US dollar's strength, rather the USD continues to benefited from anticipation surrounding the future direction of quantitative easing (QE) with the market pricing in an increase in tapering.

Ahead today we have the FOMC minutes which will be closely watched for further indications as to how the Fed will handle the tapering of QE.

Leading the fall in the commodities sector were gold futures [XAU] which dropped almost $6 overnight.

ABS Job Vacancies fall

ABS job vacancies fell around 2% over the three months to November but were broadly unchanged in trend terms.

The various measures of job ads and vacancies have been broadly flat since mid year and are consistent with the unemployment rate remaining relatively stable at around 5¾% in the near term.

"Our view is that employment growth will strengthen moderately but likely remain at below trend rates. However, there remains considerable uncertainty with the labour market outlook beyond this, given our expectation of a sharp decline in capital expenditure in the mining sector from mid year," says Savita Singh at ANZ Research.

Thursday unlikely to boost the Aus dollar

We have some important data points to watch out for on Thursday.

Australian Retail Sales s.a. (MoM) (Nov) are due overnight with analysts forecasting a rise of 0.3%. Building Permits (MoM) (Nov) are also due with a figure of -0.9% expected.

Also keep an eye on China where the Consumer Price Index (YoY) (Dec) is due for release. Analysts predict a reading of +2.7%.

Analysts at UniCredit Research are not optimistic on the Aus dollar's prospects: "Far-from-brilliant data at home (retail sales and building approvals) and Chinese CPI tonight are likely to dampen any AUD-USD rally back towards 0.90 and favour more sales once the 0.8880 base is broken."

Also backing further declines in the USD/AUD exchange rate is UBS: "While resistance holds at 0.9035, the pair remains vulnerable to break through 0.8821 and extend the bearish trend to 0.8545."