The Australian dollar rebounded on Friday after briefly falling to three-month low earlier in the session, benefiting from another rally in US stocks, higher crude oil prices and ongoing speculation over who will lead the US Federal Reserve next year.
Here’s the Aussie dollar scoreboard as at 8am AEDT.
AUD/USD 0.7674 , -0.0002 , -0.03%
AUD/JPY 87.27 , 0.14 , 0.16%
AUD/CNH 5.1006 , 0.0081 , 0.16%
AUD/EUR 0.6609 , 0.0007 , 0.11%
AUD/GBP 0.5846 , 0.0009 , 0.15%
AUD/NZD 1.1146 , -0.0018 , -0.16%
AUD/CAD 0.9828 , 0 , 0.00%
Having fallen to as low as .7622 earlier in the session on the back of renewed political uncertainty in Australia, technical selling and tumbling iron ore prices, the AUD/USD found its footing in North American trade, jumping by nearly half a cent following reports from Bloomberg that US President Donald Trump was leaning towards appointing Jerome Powell as the next chair of the US Federal Reserve.
Compared to the other front-runner for the post, economist John Taylor, Powell is seen in markets to be a less-hawkish appointment for the Fed chair.
“This sent the US dollar down across the board,” said Ray Attrill, Head of FX Strategy at the National Australia Bank.
While the greenback managed to claw back losses against other major currencies later in the session, helped in part by continued weakness in the euro on the back of political uncertainty in Spain, it wasn’t enough to derail the recovery in the Aussie which was helped by position squaring, a rally in US stocks and a surge in the crude oil price, something that has flow-on effects to LNG pricing.
A stronger-than-expected preliminary US GDP figure for the third quarter — coming in at an seasonally adjusted annual rate of 3% compared to forecasts for a smaller increase of 2.6% — did little to impact the AUD/USD.
“The reversal of the USD’s fortunes meant that Friday’s winners were mostly the earlier week losers, hence NZD and AUD occupied two of the top three spots on the day and two of the bottom three slots on the week,” said Attrill.
While the AUD/USD eventually closed the week at .7676, a level it remains close to in early Asian trade on Monday, Attrill says the Aussie is still looking vulnerable from a technical perspective.
“Friday’s weekly close for AUD/USD beneath both important trend-line support around 0.7700 and the 200-day moving average at 0.7694 is ominous technically,” he says.
However, while the technicals are looking shaky for the Aussie, Attrill says the broader movements in the US dollar this week will not be driven by who Donald Trump will be appointed as the next Federal Reserve chair but rather the likelihood that US tax reforms will be delivered.
“A Powell-led Fed is surely now close to being priced into the dollar, but any loss of optimism towards US tax reform is not,” he says. “This is set to remain a key swing factor for the USD, and with that the AUD, in coming days and weeks.”
Nearer-term, there’s few events in Asia today that appear likely to move the Aussie significantly in either direction.
Japanese retail sales for September will be released at 10.50am AEDT.
Later in the session, data highlights include German CPI and retail sales, Spanish Q3 GDP and CPI, eurozone consumer confidence, UK mortgage approvals along with personal incomes and consumption data from the US, including all-important core PCE inflation data, the Fed’s preferred measure of gauging price pressures.
The latter will arrive at 11.30pm AEDT, and is expected to increase by 0.1%, the same rate seen in August.