- The Australian dollar surged higher on Tuesday on the back of ebbing concerns about the potential for a trade war erupting between the United States and China.
- RBA Governor Philip Lowe will speak midway through the Asian session.
- The US and China will also release consumer price inflation data on Wednesday.
The Australian dollar screeched higher across the board on Tuesday as conciliatory remarks from China and the United States helped boost confidence that a damaging trade war between two may be avoided.
That helped to boost stocks and commodity prices during the session, helping to fuel the Aussie’s gains.
Here’s the scoreboard as at 7am AEST on Wednesday.
AUD/USD 0.7759 , 0.0062 , 0.81%
AUD/JPY 83.18 , 1.01 , 1.23%
AUD/CNH 4.8706 , 0.0193 , 0.40%
AUD/EUR 0.6279 , 0.0032 , 0.51%
AUD/GBP 0.5473 , 0.0027 , 0.50%
AUD/NZD 1.0534 , 0.0002 , 0.02%
AUD/CAD 0.9774 , 0.0004 , 0.04%
After starting the session just below the 77 cent level, the AUD/USD began to rally as soon as Chinese President Xi Jinping began his keynote speech at the start of the Boao Forum for Asia.
While much of Xi’s commentary was near identical to statements released over recent years, he discussed potentially lowering tariffs on Chinese car imports and protecting intellectual property rights of foreign firms, addressing two major concerns raised by US President Donald Trump over recent weeks.
The soothing remarks had the desired effect for financial markets who were hoping for anything other than an escalation of the trade threats already issued by both sides, helping to boost commodities and stocks during the session.
“The impact on markets during our time zone yesterday of President Xi’s comments, in particular the references to reducing car import tariffs and protecting intellectual property rights of foreign entities, was accentuated offshore,” said Ray Attrill, Head of FX Strategy at the National Australia Bank.
“Seeing is believing, of course, especially on the latter, but for now the market chose to believe that Xi’s words will prove to be more than mere platitudes in coming months. “
The optimism generated by Xi’s speech flowed through to the trade and commodity linked Australian dollar, seeing it surge by 0.8% and 1.2% respectively against the US dollar and Japanese yen.
Traders showed little interest in news that headline and core US producer price inflation jumped to an annual pace of 3% and 2.7% respectively in March, suggesting that upstream inflationary pressures in the US economy are building.
Turing to the day ahead, there’s plenty of data and policy events scheduled that should be of interest to traders.
In Australia, the Westpac-MI consumer sentiment report for April will be released at 10.30am AEST.
RBA Governor Philip Lowe will also speak at the Australia-Israel Chamber of Commerce in Perth from 1.05pm AEST.
Regionally, China will also release consumer and producer price inflation data for March at 11.30am AEST.
Later in the session, the main highlight comes from the release of US consumer price inflation data for March.
Headline inflation is tipped to rise at an annual pace of 2.4%, up from 2.2% in February, while core inflation is seen increasing to 2.1% from 1.8% a month earlier.
While not the US Federal Reserve’s preferred inflation measure, a core figure of 2.1% would be above it’s 2% annual target.
Outside of that event, markets will also receive the minutes of the Fed’s March monetary policy meeting at 4am AEST.
Other highlights include UK industrial production and trade data along with a speech from ECB President Mario Draghi.
The latter may garner more attention than usual given hawkish remarks from another senior ECB official on Tuesday.