Australia's inflation report looks set to spice things up for Aussie dollar traders today

Ruaridh Connellan / Barcroft Media /Barcoft Media via Getty Images

The Australian dollar is back below the 78 cent level, driven lower by US dollar strength rather than Australian dollar weakness.

However, as seen in the scoreboard below, the Aussie put in a mixed performance against the crosses on Tuesday. (Prices as at 7.50am AEDT)

AUD/USD 0.7778 , -0.0027 , -0.35%
AUD/JPY 88.6 , 0.08 , 0.09%
AUD/CNH 5.1661 , -0.0128 , -0.25%
AUD/EUR 0.6612 , -0.003 , -0.45%
AUD/GBP 0.5922 , 0.0009 , 0.15%
AUD/NZD 1.1263 , 0.0062 , 0.55%
AUD/CAD 0.9859 , -0.0007 , -0.07%

As has been the case in the previous two sessions, the US dollar continued to benefit from speculation over tax reform and a change of leadership at the US Federal Reserve, seeing benchmark 10-year yields rise back above 2.4%. Strong corporate earnings results, along with a robust composite PMI report for October, did little to sway the view that the US economy is strengthening, helping to underpin the US dollar.

As a result, the AUD/USD is now back at a two-week low despite firmness in commodity prices during the session.

AUD/USD Hourly Chart

Against the crosses, the euro and Canadian dollar both benefited from position adjustments ahead of monetary policy decisions from the ECB and BoC over the next 48 hours.

The Kiwi, on the other hand, continued to struggle, weighed down by ongoing political uncertainty.

“The Kiwi has moved lower still from the announcement of the incoming Government renegotiating the RBNZ agreement, lower migration targets and uncertainty also over other policies, even though policy specifics are scant,” said David de Garis, economist at the National Australia Bank.

The UK pound was also under pressure due to renewed concerns over ongoing Brexit negotiations.

Turning to the session ahead, the movements in the Aussie in Asia are likely to be dictated by just one event: the release of Australia’s September quarter consumer price inflation (CPI) report at 11.30am AEDT.

Economists expect headline inflation to rise 0.8% for the quarter, leaving the increase on a year earlier at 0.5%. Underlying inflation, of more importance to the outlook for monetary policy settings from the Reserve Bank of Australia (RBA), is tipped to rise by a smaller 0.5%, seeing the-year-on-year rate accelerate from 1.9% to 2.0%.

This 10-second guide has more for those interested or trading around the event.

Outside of the CPI report, the calendar in Asia is devoid of any market-moving events.

Later in the session, markets will receive German business confidence, preliminary Q3 GDP from the UK along with durable goods orders, new home sales and monthly house price data from the US.

On the central bank front, the Bank of Canada will announce its October monetary policy decision at 1am AEDT. After increasing interest rates by 25 basis points in is past two meetings, markets think it’s unlikely the bank will make it a hat-trick of hikes today.

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