Strong US economic data and slippage in equities (S&P500 down 0.4%) lifted the US dollar. Bond yields fell slightly. US 2yr treasury yields fell from 0.12% to 0.11%, while the 10yr yield fell from 1.33% (a 12-month high) to 1.27%. Australian 3yr government bond yields (futures) rose from 0.21% to 0.22%, while the 10yr yield ranged between 1.28% and 1.44% - an 11-month high.
Commodities, Brent crude oil futures rose 1.2% to $64.10, copper fell 0.4%, and gold fell 1.2%.
Overnight Currency Ranges
AUD/USD: 0.7725 – 0.7772
EUR/USD: 1.2024 – 1.2093
GBP/USD: 1.3830 – 1.3903
USD/JPY: 105.78 – 106.21 (five month high)
USD/CAD: 1.2688 – 1.2746
NZD/USD: 0.7159 – 0.7212
AUD/JPY: 81.72 – 82.29
AUD/NZD: 1.0767 – 1.0795 (one month high)
The main event on this week’s domestic calendar is the Labour Force Data for January will be released at 11.30am Sydney time. Labour market conditions have improved much faster than expected, with employment in December just 0.7% below the level in March and the unemployment rate falling to 6.6% from the peak of 7.5%. While jobs growth has been robust, it has slowed. We expect further slowing to have occurred in January and expect employment to have risen by around 30k month-over-month (m/m).
The AUD/USD traded in a .7725/72 range yesterday with offering interest still expected at 0.7805 and again at 0.7820 while demand likely rests back toward 0.7700 handle.
Event Risk Data Today
Australia: The ABS will release the January labour force survey. Business surveys have seen a recent, very solid recovery in their employment indicators. However, Weekly Payrolls are pointing to a sizeable seasonal drop in early January. Due to the balance of risks, some analysts have held our earlier forecast for a 10k rise in employment (median market estimate is +30k). Holding participation flat at 66.2% and continuing the current pace of growth in the working age population means a 10k gain in employment is enough to hold the unemployment rate at 6.6%.
Euro Area: February consumer confidence will be supported by falling case counts, but the lagging vaccine rollout will remain a drag on sentiment (market f/c: -15.0).
US: Housing starts and building permits were running at a prolific pace coming into yearend. The market anticipates that starts (market f/c: -0.5%) and permits (market f/c: -1.4%) growth will slow, but remain at elevated levels. The import price index is expected to rise 1.0% in the January update. Initial jobless claims have been choppy of late, pointing to ongoing churn in the labour market (market f/c: 770k). The February Philly Fed Index should moderate to 20.0, but business conditions should improve going forward. Finally, the FOMC’s Brainard (0:00 AEDT) and Bostic (02:00 AEDT) will speak.