The Australian dollar is bouncing

Tom Shaw/Getty Images

The Australian dollar bounced on Tuesday, recovering after hitting the lowest level since June earlier in the session.

Here’s the scoreboard as at 8am AEDT.

AUD/USD 0.7577 , 0.0028 , 0.37%
AUD/JPY 85.2 , 0.19 , 0.22%
AUD/CNH 5.0209 , 0.0041 , 0.08%
AUD/EUR 0.6455 , 0.0021 , 0.33%
AUD/GBP 0.5725 , 0.0022 , 0.39%
AUD/NZD 1.1089 , 0.0007 , 0.06%
AUD/CAD 0.9687 , 0.0009 , 0.09%

The Aussie was supported by strength in stocks and commodities, along with a speech from RBA Governor Philip Lowe in which he reiterated that the next move in official interest rates in Australia was still more likely to be up than down.

Lowe also offered no commentary on the Australian dollar, allowing the AUD/USD to bounce from a five-month low of .7533 struck in Asia.

Broad-based US dollar weakness was also a feature of the session, something Ray Attrill, Head of FX Strategy at the National Australia Bank, put down to a continued flattening of the US yield curve.

“The US treasury yield curve continues to flatten [with] the 2-10s spread [in] by another three basis points overnight, weighing on the USD in the process,” he said.

US 2-year note yield rose to a nine-year high of 1.78%, seeing the spread between 2 and 10-year yields narrow to the lowest level since 2007.

Combined, it’s seen the AUD/USD lift to .7577 in recent trade.

AUD/USD Hourly Chart

Turning to the day ahead, most interest will be on two events from the US Federal Reserve — a panel appearance from Chair Janet Yellen at 10am AEDT and the release of the minutes of the FOMC’s November policy meeting later in the session.

With pricing for the December rate hike close to 100%, very little is expected from either event.

In Australia, markets will be focused on the release of Q3 construction work done at 11.30am AEDT, a partial GDP input.

Economists are looking for a quarterly decline of 2.3%, but Attrill from the NAB says there’s upside risks to this release.

“NAB has a high conviction of upside risk due to some large LNG facilities being imported in the quarter,” he says. “The NAB is going for a +14% print. If a jump of this magnitude does materialise, it should be seen for what it is — an aberration.”

Outside of the release of the Fed minutes, markets will also receive durable goods orders, initial jobless claims and the final reading of the University of Michigan consumer confidence report for November from the US.

UK Chancellor Philip Hammond will also deliver the UK budget to parliament.

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