The Australian dollar is getting a boost from surging crude oil prices

Hannah Peters/Getty Images
  • The AUD/USD did an abrupt about-face on Wednesday, recovering sharply after hitting a fresh 11-month low earlier in the session.
  • Soaring crude oil prices, along with strength in stocks, helped to support the Aussie.
  • Most of the big events on Thursday arrive in the second half of the session. The headline acts include US CPI and the Bank of England interest rate decision.

The Australian dollar recovered slightly on Wednesday after falling to a fresh 11-month low earlier in the session, helped by strength in stocks and another surge in crude oil prices.

Here’s the scoreboard as at 7am AEST.

AUD/USD 0.7463 , 0.0013 , 0.17%
AUD/JPY 81.88 , 0.54 , 0.66%
AUD/CNH 4.7491 , 0.0047 , 0.10%
AUD/EUR 0.6296 , 0.0013 , 0.21%
AUD/GBP 0.5509 , 0.0007 , 0.13%
AUD/NZD 1.0686 , -0.0008 , -0.07%
AUD/CAD 0.9592 , -0.0057 , -0.59%

“After yesterday’s decision by President Trump to pull out of the Iranian nuclear deal and reinstate sanctions on Iran, oil prices embarked on a steady rise aided as well by overnight news of an unexpected drop in US stockpiles, reinforcing the notion that the oil market is tightening and hence vulnerable to a reduction of Iran crude supply,” said Rodrigo Catril, Senior FX Strategist at the National Australia Bank.

The surge in crude prices helped to lift stocks as well as the LNG-linked Australian dollar,” said Catril.

“The improvement in risk sentiment and move higher in oil prices has helped the AUD pair back all of yesterday’s losses with the pair now trading at 0.7463.”

AUD/USD Hourly Chart

Turning to the day ahead, most of the big events arrive in the second half of the session.

In Asia, China will release consumer and producer price inflation figures for April at 11.30am AEST.

That will be followed trade and industrial production figures from the UK, along with the latest Bank of England (BoE) interest rate decision for May.

“The Bank is expected to stand pat and although the consensus view is for the BoE to lower its growth and inflation forecasts these expectations are largely reflected in the bond market and the GBP,” says Catril.

“A full rate hike has now been pushed out to February 2019, thus we think the risk is that the BoE turns out less dovish than current pricing suggests.”

Rounding off the major events, US consumer price inflation (CPI) data for April will also be released.

Headline CPI is expected to lift 0.3% over the month, leaving the change on a year earlier at 2.5%, up from 2.4% in March. Core CPI is seen rising 0.2% seeing the year-on-year rate lift to 2.2%.

“Given the recent Fed emphasis on its symmetric inflation tolerance and current pricing for just over two more Fed hikes in 2018, unless we get a big upward CPI surprise, our suspicion is that today’s inflation data is unlikely to elicit a big market reaction,” Catril says.

Business Insider Emails & Alerts

Site highlights each day to your inbox.

Follow Business Insider Australia on Facebook, Twitter, LinkedIn, and Instagram.