The Australian dollar is climbing as the global economy continues to impress

Photo: Mike Powell /Allsport.

The Australian dollar ground higher against the greenback and major crosses on Wednesday, supported by improved investor sentiment and technical buying.

Here’s the scoreboard as at 7.25am AEDT.

AUD/USD 0.7861 , 0.0027 , 0.34%
AUD/JPY 88.6 , 0.20 , 0.23%
AUD/CNH 5.2247 , 0.0021 , 0.04%
AUD/EUR 0.6681 , 0.0011 , 0.16%
AUD/GBP 0.5930 , 0.0014 , 0.24%
AUD/NZD 1.0964 , 0.0024 , 0.22%
AUD/CAD 0.9807 , 0.0029 , 0.30%

As seen in the hourly chart below, the AUD/USD jumped higher midway through the Asia session on the back of stop-loss buying and thin market conditions, eventually holding those gains for the remainder of the day.

The Aussie was also largely unmoved on the news that the US services sector saw activity levels improve at the fastest pace in 12 years during September.

Indeed, along with strong readings from Europe and China released in recent days, the PMI data has bolstered confidence that the global economy is continuing to strengthen, underpinning the recovery in the commodity-linked Aussie across the board.

AUD/USD Hourly Chart

Turning to the session ahead, the Aussie’s movements will likely be dictated by the release of Australian retail sales and international trade figures for August at 11.30am AEDT.

Retail sales are tipped to lift 0.3% having fallen flat in July while the trade surplus of $870 million is expected, up from $460 million a month earlier.

On the retail sales report, there are a few forecasters predicting a decline in sales for the month, something to consider given concerns expressed by the RBA over the outlook for household spending in recent months.

Outside of the Australian data releases, the regional calendar is devoid of top-tier market events, likely ensuring that movements in the USD/JPY — often influential on the broader US dollar index in Asia — will help dictate the direction of the Aussie.

The data calendar remains light in the second half of the session with US factory orders and weekly jobless claims the only major releases of note.

On the Fed front, FOMC members Powell, Williams and Harker are all scheduled to speak.

“Powell and Williams are the ones to watch,” says Tapas Strickland, economist at the National Australia Bank.

“Williams as he is seen to be close to the centre of gravity in the FOMC, and Powell for any potential views given he is a front runner to lead the Fed following the end of Yellen’s term.”

The ECB will also release the minutes of its September monetary policy meeting, an event that could well trump all others during the session.

“The Minutes may garner some attention this month for details on the ‘very preliminary’ discussions held on tapering last meeting,” says Strickland. “NAB thinks a taper is likely to be announced at the October meeting.”

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