The Australian dollar put in a mixed performance on Tuesday, falling against the greenback but rallying against most of major the crosses.
Here’s the scoreboard as at 7.30am AEDT.
AUD/USD 0.7878 , -0.0033 , -0.42%
AUD/JPY 84.49 , 0.17 , 0.20%
AUD/CNH 4.9953 , 0.0071 , 0.14%
AUD/EUR 0.6386 , 0.001 , 0.16%
AUD/GBP 0.5631 , -0.0017 , -0.30%
AUD/NZD 1.0724 , -0.0004 , -0.04%
AUD/CAD 0.9959 , 0.0022 , 0.22%
The main theme of the session was once again broad-based US dollar strength, continuing the rebound that began late last week.
“The US dollar is getting it’s mojo back,” said Greg McKenna, Chief Market Strategist at AxiTrader.
“It is still way too early to say the worm has turned but the very solid bounce from around 88.11 to the current 89.71 in the US dollar index following Friday’s key reversal day is encouraging.”
McKenna says the US dollar may be finding buyers from a stabilisation in US bond yields.
“My sense at the moment is US bond rate stability is good for the US dollar because it doesn’t spook traders… [about the] size of the US deficit,” he says.
With the greenback shooting higher and stocks coming under pressure, it acted to drag the risk-sensitive Australian dollar lower, seeing it fall to session lows in recent trade.
However, the Aussie put in a stronger performance against all of the major crosses aside from the British pound which found support from renewed speculation about Brexit negotiations.
Turning to the session ahead, the main item on the agenda for Australian dollar traders will be the release of Australia’s December quarter wage price index (WPI) report at 11.30am AEDT.
Wage pressures, or lack thereof, has taken on increased significance in recent months given the Reserve Bank of Australia (RBA) has stated that an acceleration will likely be required for the bank to meet its inflation targets.
Any further weakness in the WPI — like what was seen in the September quarter report — will raise questions as to whether inflation will lift to necessary levels to allow the RBA to begin lifting interest rates in the quarters ahead.
“A weaker-than-expected WPI could easily knock [the Aussie] another 50 points lower today,” McKenna says.
Markets are looking for a quarterly increase of 0.5% leaving the annual rate unchanged at 2.0%.
This 10-second guide has more on what to expect.
Australian Q4 construction work done will also be released alongside the WPI with markets looking for a drop of 10% following a 15.7% increase in the September quarter.
This report will flow into next month’s Australian GDP report, although it tends not to create too much of a market reaction based on historic patterns.
Outside of Australia, markets will also receive Japan’s flash manufacturing PMI report for February at 11.30am AEDT.
Later in the session, the PMI deluge continues with manufacturing and services PMIs arriving from France, Germany, the Eurozone and US.
The UK will also release unemployment data, including all important wage figures, while US existing home sales and weekly crude inventory data from the API will also arrive during the session.
On the central bank front, the minutes of the US Federal Reserve’s January FOMC meeting will also be released at 6am AEDT. Bank of England Governor Mark Carney is also scheduled to speak.