Overnight Interbank Range
AUDUSD 0.6958 – 0.7024
AUDEUR 0.6207 – 0.6235
AUDGBP 0.5567 – 0.5599
AUDNZD 1.0510 – 1.0543
- The June US payrolls report revealed the US economy created 224k new jobs against expectations of 160k. The unemployment rate edged up to 3.7% from 3.6% and average hourly earnings grew 0.2% in June for annual growth of 3.1% (exp. 0.3%/3.2%). The solid US payrolls report dampened Fed rate cut expectations and severely dented the argument for a 50bps rate cut by the end of the month. Effectively the debate has now switched from a 25bps or 50bps rate cut to a 25bps cut or none.
- The market is now pricing 27bps of cuts by the US Fed at their meeting later this month, down from 33bps prior to payrolls. Looking at rate cut expectations over the next year, the market now prices 96bps of Fed rate cuts, down from 109bps previously. Equity markets initially reacted negatively to the prospect of less aggressive monetary stimulus from the Fed, before recovering to close marginally lower on the day.
- Iron ore was a big mover on Friday, falling 5.4% after the China Iron and Steel Association asked regulators to investigate whether “non-market factors” were behind the recent rise in prices, but as it has been the case for a while AUD showed little sensitivity to the decline in iron prices.
- The CAD was the best performing currency over the weekend, largely driven by a solid Canadian employment report which showed a much stronger than expected increase in wage growth. The market pared back its expectations of rate cuts by the Bank of Canada, but one remains fully-priced over the next 12 months.
Data / events this week
- NAB Business Survey Tuesday
- RBNZ Governor Orr speaking Thursday
- Fed Chair Powell delivers Semi-annual Testimony to the House Wednesday & Senate Thursday
- FOMC minutes Wednesday
- Other Fed speakers Bullard, Bostic, Williams, Barkin, Kashkari
- China inflation & trade data
- ECB minutes