The Australian dollar holds onto high ground above 0.66
The Australian dollar continued its winning ways for a good part of last week, hitting 11-week highs of 0.6686, before a weaker Aussie jobs report undercut some of its bullish momentum. The Australian dollar starts the week in pretty good shape, just shy of 0.6650. It’s a heavy hitting global calendar 2-weeks out from Christmas - Nov US non-farm payrolls, US Oct. CPI and retail sales, alongside ECB, BoE and BoJ policy meetings.
The Australian dollar holds onto high ground above 0.66
This will be our last Australian dollar update for the year, so we will take this opportunity to say a big thanks for your support this year and pass on our best wishes for a well-earned Christmas and New Year break. We will return in mid-January 2026.
The Australian dollar continued its winning ways for a good part of last week, hitting 11-week highs of 0.6686, before a weaker Aussie jobs report undercut some of its bullish momentum. The Australian dollar starts the week in pretty good shape, just shy of 0.6650. It’s a heavy hitting global calendar 2-weeks out from Christmas - Nov US non-farm payrolls, US Oct. CPI and retail sales, alongside ECB, BoE and BoJ policy meetings.
A hawkish RBA fires up the Australian dollar
The RBA unsurprisingly left rates unchanged at its final meeting for the year last Tuesday. The statement landed on the more measured and balanced side of expectations. The press conference however was a lot more eventful, book-ended by an uncharacteristically plain speaking, hawkish Governor - further rate cuts are unlikely in the foreseeable future. In response to the opening question she said that the Board considered the circumstances under which policy would need to be tightened. The last question was an opportunity for the Governor to address market pricing and if anything, her comments endorsed expectations for hikes next year.
Rates markets went into the RBA meeting pricing +30bp in rate hikes by end-2026, and by the time the press conference ended, they were pricing in +46bp.
The Australian dollar was whippy around the RBA, but ultimately settled higher. We saw a better lunge higher by the Australian dollar a couple of days later when the Fed cut rates 25bp, but did not live up to expectations for a hawkish cut. In the immediate moments after Chair Powell's press conference, the Australian dollar traded to 0.6686, a 7-week high.
The FOMC delivered a 25bp cut at its Dec. meeting as widely expected, with 3 dissenters among the Board - Fed Presidents Goolsbee and Schmidt voted in favour of leaving rates on hold, while Fed Governor Stephen Miran dissented in favour of a larger 50bp cut (his third consecutive dissent).
While Powell noted that fed funds are now within the range of neutral, he betrayed a lot more concern about labour market risks, noting that the labour market may be cooling "faster than we thought". When asked whether sufficient insurance has been put in place. Powell took a more nuanced approach than in Oct when he said bluntly "another cut is not a forgone conclusion. Chair Powell's response this time around was much more deft, noting the Fed will have a lot more data between now and the Jan meeting, and they are well positioned to respond. The takeaway from all this is that despite ongoing tension in the balance of risks this Fed Chair appears to be prioritising labour market risks, leaving the USD in a tough spot.
The Australian dollar was riding high in the wake of a Fed meeting that did not live up to the hawkish hype, but Australia's Nov. jobs reports did a number on the currency. Employment fell -21.3k (vs exp. +20k), led by a -57k decline in full-time jobs, the biggest monthly decline in almost 2 years. Admittedly, the unemployment rate held steady at 4.3%, cushioned by a fall in the participation rate, but broader measures of underemployment rose and hours worked fell. With each passing month, a clearer picture of a gradually softening labour market continues to unfold.
As of mid-last week, the Australian dollar was eyeing off potential new 2025 highs above 0.6707, but hopes were dashed by a soft jobs report and in the end, it was more of a middling performance by the Australian dollar.
The Australian dollar also ceded ground on several crosses as the week unfolded; AUD/EUR started the week at multi-month highs above 0.57, but hawkish ECB speak and softer Australian job's numbers took some shine off of the cross. AUD/EUR starts the week at 0.5660.
AUD/NZD put in a steadier performance, holding above 1.14, even as NZ data increasingly reinforced rebound expectations. The cross is trading well higher Monday afternoon above 1.15 after new RBNZ Governor Breman pointedly noted financial market conditions have tightened beyond what is implied by the Bank's central projections.
AUD/JPY continues to defy gravity trading up through 104.0 at one stage last week. The BoJ meets later this week and a rate hike is almost assured. The cross is off its best levels, at 103.15.
By day's end, the AUD was well of its highs but still holding comfortably onto a 0.66-handle.
This saw AUD's bullish momentum drop off on the crosses into the end of the week; AUD/EUR is up 0.4% near 0.5667 w/w in line with comments from the ECB's Schnabel that the next move would likely be a hike, AUD/JPY has pulled back slightly below 104.0 following recent BoJ comments all but confirming a hike at Friday's meeting, however remains up 0.3% w/w, AUD/NZD remains fairly flat w/w near 1.1450 although NZ Q3 GDP this week is expected to show signs of budding economic resilience.
Equities slip into week's end, but key metals continue to surge
US equities posted strong gains early last week fuelled by the Fed's 25bp cut with the S&P500 reaching new highs just above 6900. However a weaker earnings report from Oracle and comments that some AI data centre openings would be delayed from 2027 to 2028 saw AI/tech angst resurface, triggering a broad sell-off in equities. That saw the S&P500 give back all of its early week gains, leaving it flat on the week.
A number of metals continue to regularly print all-time highs.
Silver prices have exploded recently, climbing 25% in the last month on supply shortage concerns. Prices continued to soar early last week, hitting new highs at $64.65/oz. Silver slid -2.5% on Friday as investors grow wary about stretched momentum. Still, silver rose 7% last week.
Copper has hitched a ride as a key input in the AI/data centre hyper-scaler build out and is printing fresh highs on a near daily basis lately. LME Copper smashed through $11000 in late Nov and hasn't looked back, trading to almost $12000 late last week.
The week ahead offshore calendar is punchy
It’s a heavy hitting global calendar 2-weeks out from Christmas. Nov US non-farm payrolls, Oct. CPI and retail sales, alongside ECB, BoE and BoJ policy meetings lead the week.
Australia's calendar thins considerably, with only soft surveys including Westpac's Dec. consumer sentiment and the PMIs on tap. We are very curious to see, how sentiment amongst mortgagees looks after Governor Bullock's blunt hawkish message.
The consensus on Nov. US payrolls is for a 50k gain, about in line with new much reduced estimates of the breakeven pace in recent months. Parts of the shutdown-delayed Oct. jobs report will also be released - payrolls, but not the unemployment rate.
The BoE is widely expected to cut on Thursday, but the ECB will be keeping rates on hold. If anything, markets are on the lookout for a potentially more hawkish Legarde given recent stronger growth and calls for hikes in 2026 from the hawkish wing of the Bank's Governing Council.
Monday
- Canada Nov CPI
- US Dec NY Empire Manufacturing Survey
- Fedspeak; Williams & Miran.
Tuesday
- Australia Dec Westpac Consumer Confidence, S&P Global PMI (Prelim.)
- RBA Assist. Gov. Brad Jones speaks in Sydney.
- Eurozone Dec HCOB PMI (Prelim.)
- Australia, Japan, UK & US Dec S&P Global PMI (Prelim.)
- US Oct-Nov Non-farm Payrolls, Nov Unemployment Rate, Oct Retail Sales
Wednesday
- Australia Nov Westpac Leading Index
- UK Nov CPI
- Eurozone Nov CPI (Final)
- Fedspeak; Waller, Williams & Bostic.
Thursday
- Australia Dec Consumer Inflation Expectations
- NZ Q3 GDP
- Bank of England Monetary Policy Meeting
- ECB Monetary Policy Meeting
- US Nov CPI
Friday
- Australia Nov Private Sector Credit
- BoJ Monetary Policy Meeting
- Japan Nov CPI
- US Dec Uni. of Michigan Sentiment (Final)
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