Australian dollar / Pound Sterling exchange rate slumps as markets take AUD/USD towards RBA target at 0.85

Modified: Monday, 10 March 2014 22:21 GMT
Written by: Gary Howes

Australian dollar exchange rates (AUD) are today falling after the release of a poor set of employment numbers out of the Aussie economy. The declines are in line with the desire at the Reserve Bank of Australia to see AUD/USD below 0.90.

The RBA has said that it believed the AUD/USD cross should be closer to 0.85.

2014's move 0.90 seen was quickly snuffed out by traders even without a poor Chinese or Aussie data release to blame it on, but found acceleration in the latest jobs numbers published overnight.

Aus dollar exchange rates today

The pound sterling to Australian dollar exchange rate (GBP/AUD) is trading 1.29 pct higher at 1.8602.
The euro to Australian dollar exchange rate (EUR/AUD) is 1.55 pct higher at 1.5499.
The Australian dollar to US dollar rate (AUD/USD) is 1.5 pct lower at 0.8783.
The Aus dollar to New Zealand dollar (AUD/NZD) is now 1.13 pct lower at 1.0575.

Note: Our AUD quotes are taken from the wholesale spot markets. 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 exchange rate action over the past 24 hours

Today’s Australian labour force report was weaker than expected, with the detail and underlying trends soft.

Employment declined by 22.6K, more than retracing the 15.4K increase in November (revised down from +21.0K). This was driven by full-time employment
(-31.6K) which remains negative in trend terms.

The unemployment rate was 5.8%, although did tick up in unrounded terms by 0.1ppt to 5.85% from 5.77% in November. The unemployment rate is now just below the 5.87% peak in June 2009.

Although Australia Unemployment Rate stayed flat at 5.8% in Dec 2013, in-line with expectation, employment figures dropped by 22.6K, below the market estimates of 10K increase.

Commenting on the figures is Riki Polygenis at ANZ Research:

"Today’s figures disappointed, and while broadly consistent with our view that the unemployment rate would settle in the 5¾% - 6% range over coming months, this in large part reflects the shift down in the participation rate. This in itself is not a positive signal about the health of the labour market if it reflects a discouraged worker effect. That said, we are somewhat encouraged by the recent relative steadiness in forward indicators of labour demand such as job advertisements, which signal some stabilisation in labour market conditions in coming months (see PDF for detail on the December SEEK job ads data)."

ANZ Research say they believe the Reserve Bank of Australia will remain on hold through 2014.

Outlook for pound sterling vs Aus dollar

The pound sterling (GBP) is currently enjoying a strong period of demand and is likely to retain the edge over AUD as a result.

"We expect BoE hikes by August, and this is still not fully priced. The key variable is the unemployment rate, which is expected to hit the 7% threshold in Q1 and firmly breach by Q2. There are strong inflows into UK equity, overwhelming the negative impact from outflows," says an exchange rate forecast issued by Nomura.

Outlook for AUS dollar exchange rates today

The outlook for the Aus dollar has been dented markedly by today's employment figures.

"Concern over Australia economic prospect triggered the AUD/USD to break below 0.8821 support this morning, the worst among major currencies. The weak employment data may reflect the slowing in Australia economy. The RBA will likely keep the easing measures unchanged this year, which may weigh on the AUD. AUD/USD may fall further to 0.8000 in medium term. Technically, AUD/USD may drop to 0.8579, even fall further to 0.8067, with resistance at 0.9000." - Citigroup.

"AUD/NZD may tank to 1.0500 and then 1.0285, with resistance at 1.0863." - Citigroup.

"The macro speculative market is piling into AUD/USD shorts, with .8500 seen now as a foregone conclusion and some starting to talk now of levels below .80 cents. Initial resistance is at previous lows of .8820/25 and a break above there will run into further headwinds near the .8870 breakdown level from earlier today. Sorry, I’m of no help to anyone in this move and I’m getting it wrong more often than I’m getting it right." - Sean Lee at FXWW.

Euro / Australian dollar exchange rate (EUR/AUD): ICN Financial have featured price action in this pairing today saying:

"The EURAUD approached the 38.2% Fibonacci correction of the upside wave shown on graph from where it rebounded to the upside, breaching the descending channel’s resistance.

"The breach supports the EURAUD to return to the general uptrend, confirmed with a successful retest of the breached resistance that resides with 23.6% Fibonacci correction at 1.5230.

"The EURAUD now must breach 1.5510 then 1.5595 to confirm the long-term uptrend with extended targets toward the psychological 1.6000 areas, supported by the MA 50. Stability above 1.5230 is required to prevent the pair from returning to the downside to resume."