The Australian dollar is struggling to find traction

Getty/Matt Cardy
  • The AUD/USD remains anchored around a one-year low.
  • It failed to hold onto gains above .7500 not once but twice on Wednesday.
  • There’s plenty of big data releases scheduled today, including Australian trade figures in Asia.

The Australian dollar endured a topsy-turvy session on Wednesday, failing not once but twice to hold onto gains above the 75 cent level.

However, while the Aussie couldn’t find any traction against the greenback, as seen in the scoreboard at the close, it performed better against the crosses.

AUD/USD 0.7491 , 0.0002 , 0.03%
AUD/JPY 82.28 , 0.01 , 0.01%
AUD/CNH 4.7742 , 0.0284 , 0.60%
AUD/EUR 0.6268 , 0.0024 , 0.38%
AUD/GBP 0.5519 , 0.0019 , 0.35%
AUD/NZD 1.0708 , 0.002 , 0.19%
AUD/CAD 0.9644 , 0.0024 , 0.25%

After grinding higher in Asia, helped by firmer Chinese commodity futures, a solid China manufacturing PMI report for April and tweaks to positioning ahead of the US FOMC interest rate decision, the AUD/USD gave back all of its gains in European trade as US bond yields began to push higher.

That reversal was briefly interrupted following the release of the US Federal Reserve’s FOMC policy decision at 4am AEST.

As expected, the Fed left its funds rate steady in a range of 1.5 to 1.75%.

In the accompanying policy statement, the FOMC noted that “inflation on a 12-month basis is expected to run near the Committee’s symmetric 2% objective over the medium term.”

The insertion of the word “symmetric” initially resulted in US dollar selling as traders speculated that the Fed would allow inflation to move above its 2% annual inflation target without resulting in a more aggressive rate tightening schedule.

However, that move soon stalled and then reversed as markets continued to price in a 100% likelihood that the Fed will lift interest rates at its June policy meeting.

“The post-meeting statement revealed a Fed more confident that inflation will recover, evident by the removal of the line that the Committee is ‘monitoring inflation developments closely’,” said Rodrigo Catril, Senior FX Strategist at the National Australia Bank.

“This observation was added when inflation was edging away from target.”

The reversal in the US dollar is captured in the 5-minute AUD/USD chart below.

AUD/USD 5-Minute Chart

Looking to the day ahead, there’s once again a raft of data scheduled both in Australia and abroad, providing plenty of opportunity to deliver short-term bouts of market volatility.

In Australia, the Ai Group’s performance of services index for April will be released at 8.30am AEST. That will be followed three hours later by trade and building approvals data from the ABS for March.

For trade, a surplus of $950 million is expected, up from $825 million in February. Being the end of the quarter, this report will also provide an indication as to what contribution trade made to GDP growth in early 2018.

On building approvals, markets expect an increase of 10.8% following a 6.2% decline in February. This report is now largely overlooked by traders given volatility created by the increased prevalence of lumpy apartment approvals.

Outside of Australia, other highlights today include Eurozone inflation for April along with trade, labour costs, services PMI and factory orders from the United States.

On the central bank front, ECB members Praet, Constancio and Coeure are all scheduled to deliver speeches.

Finally, Japanese markets will be closed for a public holiday (and again on Friday).

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