The Australian dollar is in positive territory in the Friday session. Currently, AUD/USD is trading at 0.7317, up 0.33% on the day.
Soft Australian employment data on Thursday sent the Australian dollar lower, but the currency has recouped most of these losses on Friday. The economy lost a massive 146.3 thousand jobs in August, surprising the markets, as the consensus stood around -80 thousand. The slide is attributable to the wave of lockdowns which were imposed in New South Wales and Victoria. The government’s strict health restrictions are stifling economic growth and are expected to result in a contraction in Q3 growth.
RBA Governor Philip Lowe said as much earlier this week when he stated that the Q3 decline could be 2% or larger, and unemployment could rise to the high 5% range. I am a fan of Governor Lowe’s clear messages to the markets, as I remember all too well Alan Greenspan’s indecipherable Fedspeak statements which invariably left me scratching my head. Still, Lowe’s blunt assessment of negative growth is not good news for the Australian dollar.
Lowe also reiterated that the Bank would not raise interest rates before 2024 from their record low of 0.10 per cent. Interestingly. Lowe admitted he couldn’t understand why the financial markets were much more hawkish and had priced in a cash rate of 0.25% by the end of 2022 and 1.0% by the end of 2024.
US Retail Sales higher than expected
A strong US retail sales report is also weighing on the Australian dollar. The gain of 0.70% beat the consensus of -0.70%. Although not a huge gain by any means, the reading has ignited expectations of a Fed taper, perhaps at the November policy meeting. The markets will be anxiously looking for signals from the Fed that the November meeting will be a live one.
- There is resistance at 0.7433, followed by 0.7512
- On the downside, 0.7310 is fluid. Below, there is support at 0.7266