The Australian dollar turned out a mixed performance against the majors as traders balanced global risk sentiment against positive Aussie jobs and falling expectations of negative rates from the RBA.
Australia Headlines and Economic data
RBA governor says economic recovery needs risk-takers – “Addressing the Committee for Economic Development of Australia, Dr Lowe said while the country was on the “road to recovery” there were several factors, including low population growth, that could undermine the economy.”
We saw a positive session for the Aussie dollar, likely with the help of broad risk sentiment flows. Traders were feeling positive during the Monday session after news hit the wires of another positive COVID-19 vaccine trial outcome (Moderna says preliminary trial data shows its coronavirus vaccine is more than 94% effective). The risk rally seems to have been limited, likely as traders remembered that cases were rapidly rising and mandatory lockdowns were quickly coming from governments across the U.S. (much of California ordered back into lockdown) and Europe (Germany’s Merkel pushes stricter COVID measures).
RBA Meeting minutes: Australia’s central bank says it is ready to do more, emphasizes virus containment is key – “the bank’s Board felt taking interest rates negative was not “sensible” and any further action would involve increased bond purchases.”
Traders shifted negative in risk sentiment during the Tuesday session, likely the driver for the Aussie’s move lower during the U.S. session. Focus seems to have changed from positive vaccine updates to rising virus restrictions throughout the U.S. and Europe, and concerns of a no-deal Brexit may have been a factor as well.
Australia experiences slowest rate of wages growth on record – “the latest findings also showed Australian pay packets had their weakest-ever 12-month period, rising only 1.2 per cent.”
- “Figures from the Australian Bureau of Statistics (ABS) on Thursday showed employment escalated by a solid 178,800 in October, after slipping in September.”
- “Economists polled by Reuters were predicting a fall of 30,000 with the unemployment rate rising to 7.2%.”
Broad move lower in the Aussie against the major during the Thursday session despite a better-than-expected jobs growth number. It’s possible traders were focusing on the unemployment rate more than the net positive job additions, but global risk sentiment may have been a contributor as well.
Traders were leaning negative on the session, supported further by fresh headlines of Brexit uncertainty (Brexit Talks Suspended After Negotiator Catches Covid-19), and then later at the end of the U.S. session when news popped up that U.S. Treasury Secretary Mnuchin denied the extension of Fed aid programs
Australian retail sales up 1.6% after earlier 1.1% drop – Turnover rose 5.6% compared with September 2019. This surprise was likely the main driver for the Aussie’s broad move higher throughout the rest of the Friday session, along with counter currency weakness into the weekend.