The Australian dollar is sitting just above the 76 cent level in early Asian trade on Wednesday, giving back much of its post Australian retail sales and RBA gains as a combination of weaker base metals prices and higher short-dated US bond yields led to profit-taking among investors.
Here’s the scoreboard as at 7.45am AEDT.
AUD/USD 0.7609 , 0.0011 , 0.14%
AUD/JPY 85.67 , 0.27 , 0.32%
AUD/CNH 5.0350 , 0.0088 , 0.18%
AUD/EUR 0.6434 , 0.0032 , 0.50%
AUD/GBP 0.5660 , 0.0024 , 0.43%
AUD/NZD 1.1056 , -0.002 , -0.18%
AUD/CAD 0.9659 , 0.0035 , 0.36%
After opening Tuesday’s session buying .7598, the AUD/USD rose to as high as .7563 in Asia, boosted by a stronger-than-expected Australian retail sales report for October and softer language from the RBA on its current level.
However, those moves were largely unwound later in the session with a sharp decline in base metals markets, along with a continued optimism over the prospect for US tax reform, helped to boost short-dated US bond yields and, as a result, the US dollar.
“The AUD has had a bit of a roller coaster ride, although it is essentially unchanged relative to yesterday’s opening level,” says Rodrigo Catril, currency strategist at the National Australia Bank.
“[The] AUD’s performance was driven by better than expected Australian retail sales, solid Caixin China PMIs and an unchanged RBA but slightly more positive on the economic outlook.
“These factors helped the AUD… but overnight softness in metal prices has seen the pair reversed all of these gains. Although iron ore prices are little changed, copper and nickel fell just over 4% and aluminium dropped just under 1%.”
The US dollar was largely immune to the release of a weaker-than expected services PMI report released by the ISM during the session, showing little reaction to the data print.
The end result meant that the AUD/USD is currently trading at .7609, up just 0.14% for the session in late North American trade.
Turning to the session ahead, it will be dominated by Australia’s Q3 GDP release that will arrive at 11.30am AEDT.
Markets are looking for a quarterly increase of 0.7%, seeing the annual rate lift to an above-trend pace of 3.0%. There are a wide range of individual economists forecasts, so this release carries the potential to move the Aussie meaningfully in Asia.
This 10-second guide has more on what to look out for.
Outside of Australia, data highlights include German industrial production and the ADP National Employment report in the US, a release that arrives just two days before the US non-farm payrolls report.
On the central bank front, most attention will be on the Bank of Canada’s (BoC) December monetary policy decision at 2am AEDT.
“The consensus view sees the BoC standing pat today, but there has been a few reputable banks [and] independent houses calling for a hike,” says Catril. “BoC rate hike pricing expectations have been brought forward over the past week — April now fully priced while pricing for a December hike is at 17%. Nevertheless given current pricing, a hike today would be a big surprise to the market.”
The Reserve Bank of India will also announce its December monetary policy decision at 8pm AEDT. No change in the key repo rate is expected.
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