- The Australian dollar endured a roller coaster ride on Wednesday, falling heavily in European trade before storming higher into the close.
- Shifts in sentiment towards the prospect of a trade war erupting between the United States and China largely explain the skittish moves.
- Australia will release trade data for February later in the session.
The Australian dollar endured a roller coaster ride on Wednesday, falling heavily in European trade only to recover later in the session as US stocks stormed higher.
The AUD/USD hourly chart below reveals the whippy price action seen during the session, continuing the theme seen in recent days.
As has been the case for some time, the movements in the Aussie largely reflected shifts in sentiment towards the prospect of a trade war erupting between the United States and China.
“After yesterday’s US tariff proposal announcement on $50 billion of imports from China, early last night China matched the US move by announcing tariffs of up to 25% on $50 billion of US imports,” said Rodrigo Catril, Senior FX Strategist at the National Australia Bank.
“The tit-for-tat response triggered a sell-off in risk assets, but this initial response quickly reversed as both parties express willingness to negotiate.”
After plunging as much as 2% on the open, US stocks rallied hard over the course of the session, eventually closing up 1% or higher.
That helped to reverse safe-haven buying in US Treasuries and the Japanese yen, helping to boost other risk asset such as the Australian dollar.
“[The] AUD also outperformed the USD,” says Catril.
“The pair now trades at 0.7716 and now is marginally above the level recorded after yesterday’s better-than-expected February retail sales report.”
Whether the Aussie’s recovery will continue today will largely be determined by Australia’s trade report for February due at 11.30am AEST, along with broader risk sentiment among investors.
After posting a trade surplus of $1.055 billion in January, a smaller surplus of $725 million is expected for February.
Outside of Australia, other data highlights include services PMIs from Europe and the UK along with jobless claims and trade data from the United States.
Here’s the Aussie dollar scoreboard as at 7.55am AEST.
AUD/USD 0.7715 , -0.0001 , -0.01%
AUD/JPY 82.36 , -0.02 , -0.02%
AUD/CNH 4.8490 , -0.0003 , -0.01%
AUD/EUR 0.6281 , -0.0003 , -0.05%
AUD/GBP 0.5477 , -0.0002 , -0.04%
AUD/NZD 1.0550 , -0.0008 , -0.08%
AUD/CAD 0.9853 , 0.0008 , 0.08%