Market Update – 6th October 2017 – AUD Headed Lower As Retail Sales Disappoint

Poorer retail sales figures yesterday suggest there is no end in sight to weak local demand dragging the Aussie lower and sending AUD/USD back into the 0.77’s. However there was some positives with a sharp rise in our trade balance figures yesterday thanks to surging iron ore exports to China. Prices for iron ore not surprisingly have been robust reaching as high as US$80 a tonne back in Feb. More recently iron ore prices have been sluggish with the key base metal barely moving overnight and seemingly appearing very much off the radar of investors at this point in time. Iron ore is crucial to where the AUD trades and generally speaking a spike in iron ore prices is generally followed by a spike in AUD and vice versa, however recent weakness sees us testing lower levels vs the Greenback and other currencies. But being the mining nation that we are there’s certainly still plenty of reasons to be bullish on Australia’s mining sector, with global shortages forecast for everything ranging from Cobalt and Lithium used in electric vehicle batteries and Zinc which is used to galvanise steel. Even oil which has been in the bottom draw for a few years now, could make a surprise resurgence thanks to dwindling current reserves and a lack of investment in new wells and exploration.

Ahead tonight is U.S employment data with non-farm payrolls due for release along with the unemployment rate at 11.30pm. Forecasts are for no change to the current level of unemployment which is hovering around 4.4%, however economists are tipping a pretty poor employment number somewhere around the 80K new jobs. If this is the case it would be the worst figure since June 2016. A strong jobs number will certainly be bullish for the USD, which will likely see AUD/USD consolidate in the 0.77’s or lower. The opposite is expected if we see a poor reading.

AUD EXCHANGE RATES:

AUD/USD – 0.7794

AUD/GBP – 0.5941

AUD/EUR – 0.6655

AUD/NZD – 1.0947

AUD/JPY – 87.942

COMMODITIES: 

Gold – A$1626/oz

Silver –  A$21.30/oz

WTI – US$50.94/barrel

DATA RELEASES TODAY:

USD – Unemployment rate & Non-Farm Payrolls number at 11.30pm