The Australian dollar remains in the wars


The Australian dollar remains in the wars in early Asian trade on Thursday morning, undermined by soft Australian economic data, weakness in commodity prices and another bout of broad-based US dollar strength.

Here’s the scoreboard as at 7.50am AEDT.

AUD/USD 0.7563 , -0.0041 , -0.54%
AUD/JPY 84.84 , -0.77 , -0.90%
AUD/CNH 5.0055 , -0.0257 , -0.51%
AUD/EUR 0.6410 , -0.0019 , -0.30%
AUD/GBP 0.5651 , -0.0005 , -0.09%
AUD/NZD 1.0996 , -0.006 , -0.54%
AUD/CAD 0.9676 , 0.0026 , 0.27%

After opening Wednesday’s session buying .7604, the AUD/USD came under immediate selling pressure following the release of Australia’s September quarter GDP report.

At 0.6%, the quarterly increase was only marginally below the 0.7% level expected. However, the internals of the report revealed a very weak household sector with consumption growth slowing to levels not seen since the final quarter of 2008.

That saw the Aussie lose ground not only to the greenback but all major crosses in Asia, bolstering confidence that the Reserve Bank of Australia is unlikely to start tightening monetary policy settings anytime soon.

That theme continued later in the session with the Aussie’s cause not helped by a further unwind in bulk commodity prices — especially iron ore — and a stronger US dollar which continued to benefit from speculation over US tax reform progress and a solid ADP National Employment report for November, boding well for payrolls growth ahead of official government data that will be released later in the week.

AUD/USD Hourly Chart

The Aussie did managed to claw back some ground against the Canadian dollar and UK pound in the second half of the session thanks to a cautious sounding Bank of Canada monetary policy statement for December — snuffing out expectations for a near-term rate hike in Canada — along with ongoing uncertainty over Brexit negotiations.

Turning to the day ahead, the data calendar slows both at home and abroad, hinting that sentiment, movements in commodity prices and technicals may play an increased role in determining which direction the Aussie will take.

In Australia, the ABS will release its international trade report for October with a surplus of $1.4 billion expected, below the $1.745 billion level of September.

“Trade is far from occupying prime billing in terms of AUD market sensitivity as the monthly current account release did in the 1980s and 90s, but the AUD remains somewhat sensitive to the print,” says David de Garis, economist at the National Australia Bank.

The report will be released at 11.30am AEDT.

Outside of Australia, there is very little in the way of market moving data released regionally or abroad.

German industrial output, French trade data, UK house prices, revised Q3 GDP data from the Eurozone and US initial jobless claims lead the headline acts.

China is also scheduled to release monthly FX reserves data for November at some point during the session, although this release has lost the market-moving clout it had in previous years.

Yuan weakness and capital outflows are no longer the concern they once were for investors.

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