The Australian dollar just powered back above 79 cents

Kevork Djansezian/Getty Images

The Australian dollar rebound went up a gear on Wednesday, powering back above the US79 cent level for the first time in a week.

However, as seen in the scoreboard below as at 8.15am AEDT, while the Aussie rallied against the greenback, it largely traded flat to slightly higher against most of the major crosses.

AUD/USD 0.7933 , 0.0074 , 0.94%
AUD/JPY 84.87 , 0.13 , 0.15%
AUD/CNH 5.0068 , 0.0302 , 0.61%
AUD/EUR 0.6367 , 0.0005 , 0.08%
AUD/GBP 0.5663 , 0.0007 , 0.12%
AUD/NZD 1.0751 , -0.005 , -0.46%
AUD/CAD 0.9915 , 0.002 , 0.20%

Broad-based US dollar weakness was yet again the key theme during the session, a slightly unusual outcome given a noticeable topside beat in January’s US CPI report.

“I’m not going to pretend I have a clue this morning,” mused Greg McKenna, Chief Market Strategist at AxiTrader, alluding to the strange reaction across markets overnight to the US data flow.

“US CPI was higher than expected, both in the monthly core and headline rates.

“US 10-year yields are at 2.91% and two-year yields are at 2.17%, thus the curve is at 74 points. But stocks have surged and the US dollar has been poleaxed even though the market expectations of a March hike increased to 83%, June to 57%, and then a third hike in September to 36%.”

So yields spiked, expectations for Fed rate increases grew but the US dollar was slammed and stocks rallied, the exact opposite outcome to that seen in early February following a lift in wage pressures in January’s US non-farm payrolls report.

Some put the weakness in the US dollar and rally in stocks down to a disappointing US retail sales report released alongside the CPI figures, a claim Mckenna says is questionable.

“Don’t tell me this is all about the miss on retail sales,” he says.

“If it is about retail sales then why are stocks excited by the prospect of higher rates and a slowing economy. That doesn’t exactly sound like a recipe for a surging stock markets.”

It was a strange session all round with a strong lift in US bond yields — which did not fall despite the weak retail sales report — doing little to help the greenback which, after initially gaining on the inflation report, went hard into reverse.

Those moves can be seen perfectly in the AUD/USD 5-minute chart below.

AUD/USD 5-Minute Chart

The Aussie’s movements largely mirrored those in US stocks during the session. Higher commodity prices — partially helped by US dollar weakness — also provided a tailwind.

After a Topsy-Turvy ride on Wednesday, local economic data will be back in focus today with the release of Australia’s January jobs report at 11.30am AEDT.

Economists expect employment to increase by 15,000, leaving the unemployment rate steady at 5.5%.

This 10-second guide has more on what to expect, including what parts of the report markets will likely focus on.

Outside of Australia, other notable releases include trade figures from the Eurozone along with producer price inflation, jobless claims, industrial production and manufacturing gauges from New York and Philadelphia from the States.

ECB members Mersch, Praet and Lautenschläger will also deliver speeches.

As a reminder, Chinese markets will be closed for the next week for Lunar New year celebrations.

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