The Aussie dollar is up 1.92% this morning and back above 80 cents. That’s the highest level it has traded at since January 23 this year.
Key to the Aussie move is that sentiment toward the US dollar has weakened along with the recent run of economic data. The euro is back up near 1.10, the Canadian dollar sits close to 1.20 and the Kiwi is back above 77 cents.
Most startling – and proving this is a US dollar move – is the pound has risen half a per cent, even though Q1 GDP in the UK printed an anaemic 0.3%.
What drove the US dollar selling – or what continued this emerging trend – last night was that US consumer confidence for April tanked below expectations with a print of 95.2. The market expected it to climb to 102.2 from March’s 101.3.
That’s a big miss and could be the “the proverbial ‘straw that broke the (US dollar) bull’s back'” Matt Weller, senior technical analyst at Forex.com told Reuters. “While this figure (consumer confidence) was a shock for dollar bulls, it merely extends the persistent trend of disappointing U.S. data,” he said.
That’s important because the cries that an Aussie above 80 cents means an RBA cut is a certainty will rise today and tomorrow and in the lead up to next Tuesday’s meeting. But it is worth remembering that this move is only about the Aussie dollar at the margin.
Forex traders are betting that a weak US GDP print for Q1, to be released at 10.30pm, will be followed by a dovish FOMC statement at 4am tomorrow. This combination is expected to see the US dollar fall further.
It may or it may not. This time tomorrow the Aussie dollar could be lower or higher, depending on these outcomes.
But the key for the RBA when it sits down next week is that if this move is about external factors, such as the US dollar, and not Aussie dollar specific, the RBA knows that they may waste a bullet if they try to cut to lower its value in an environment where the US dollar trend is reversing.