The Australian dollar is recovering after an earlier tumble

Photo by Matt King/Getty Images
  • The Australian dollar is back above the US 78 cent level, recovering from early losses on Wednesday.
  • Markets continue to be driven by headlines and speculation over the future direction of US trade policy.
  • Highlights today include trade data from Australia and China along with the ECB’s interest rate decision.

The Australian dollar is slowly grinding higher, recovering after falling heavily in early Asian trade on Wednesday.

Here’s the scoreboard as at 8am AEDT.

AUD/USD 0.7826 , -0.0001 , -0.01%
AUD/JPY 83 , -0.05 , -0.06%
AUD/CNH 4.9460 , 0.0081 , 0.16%
AUD/EUR 0.6304 , -0.0005 , -0.08%
AUD/GBP 0.5627 , -0.0008 , -0.14%
AUD/NZD 1.0734 , 0 , 0.00%
AUD/CAD 1.0087 , 0.0014 , 0.14%

After falling to as low as .7772 on the back of Gary Cohn’s resignation as Donald Trump’s chief economic adviser, and speculation that the US could introduce tougher trade restrictions on China earlier in the session, the AUD/USD climbed off the mat over the course of European and US trade, hitting a high of .7829 shortly after US markets opened.

There was little reaction to news that Australian GDP grew less-than-expected in the final three months of 2017, overridden by continued shifts in sentiment, and headlines, about the potential for a global trade war as a result of possible US import tariffs.

The AUD/USD currently sits at .7826, boosted by a recovery in US stocks following reports that Canada and Mexico may be excluded from potential US trade tariffs.

AUD/USD 5-Minute Chart

Against the crosses, the AUD weakened against all majors aside from the Chinese yuan and Canadian dollar, the latter coming under pressure from remarks from the Bank of Canada following its March monetary policy meeting that trade policy was becoming an “important and growing source of uncertainty”.

Turning to the session ahead, there’s plenty of risk events for traders to navigate.

In Australia, international trade figures for January will be released at 11.30am AEDT.

After logging a large $1.36 billion deficit in December, markets expect the trade balance to swing back to surplus in January.

“We are forecasting a $600 million trade surplus in January, above consensus of $160 million,” says Elias Haddad, Senior Currency Strategist at the Commonwealth Bank.

“A solid lift in commodity prices in the month should boost export values while imports are expected to cool after a 6% rise last month.”

In what will no doubt get extra attention given simmering trade tensions between them and the United States, China will also release trade figures for February during the session.

From a year earlier, exports are expected to lift by 13.6% following 11.1% increase in January. Import growth over the same period is tipped to slow from 36.9% to 9.7%.

A trade surplus of $US600 million is expected, down from $US20.34 billion in January.

Given the timing of Lunar New Year holidays, traders should expect the unexpected from this release — it often surprises during this period every year.

There’ll likely be plenty of interest on the trade surplus recorded with the United States.

Japan will also release revised Q4 GDP figures during the session. This is unlikely to interest traders with more focus on the Bank of Japan’s March monetary policy decision that will arrive on Friday.

Later in the session, data highlights include German industrial orders along with Canadian housing starts, building permits and house price data.

On the central bank front, all attention will be on the release of the European Central Bank’s (ECB) monetary policy announcement.

“The ECB is widely expected to make no monetary policy changes,” says Haddad of the Commonwealth Bank.

“The risk is the ECB tweaks its forward guidance and removes from its statement that asset purchases are intended to run beyond September 2018 if necessary.

“This would lead to an upward revision to ECB interest rate expectations in favour of euro.”

The policy announcement will be released at 11.45pm AEDT. That will be followed 45 minutes later by Mario Draghi’s press conference.

Bank of Canada Governor Stephen Poloz will also speak during North American trade.