The Australian dollar has opened the new trading week on a slightly firmer footing, benefiting from improved investor sentiment and another surge in Chinese iron ore and coal futures.
Here’s the scoreboard as at 7.55am AEDT.
AUD/USD 0.7654 , 0.001 , 0.13%
AUD/JPY 86.24 , 0.25 , 0.29%
AUD/CNH 5.0543 , 0.0111 , 0.22%
AUD/EUR 0.6518 , 0.0021 , 0.32%
AUD/GBP 0.5744 , 0.0016 , 0.28%
AUD/NZD 1.0933 , 0.0024 , 0.22%
AUD/CAD 0.9825 , -0.0008 , -0.08%
Having hit a high of .7694 earlier in the session, the AUD/USD closed the week buying .7644, succumbing to a bout of broad-based US dollar strength as the prospect of US tax reforms went from possible to probable.
“USD recovered most of its post FOMC meeting losses during Friday’s overnight session on the rising likelihood a pro growth US tax package can get signed into law before year end,” said Elias Haddad, Senior Currency Strategist at the Commonwealth Bank.
“Republicans in the US Congress appear to have secured enough votes on Friday to pass the reconciled tax bill sometime this week.”
That helped to lift short-dated US government bond yields, contributing to the rebound in the US dollar. Haddad suggests those moves may extend in the early parts of this week.
“The passage of this tax bill can offer the USD some near-term support,” he says.
And, as seen in the 30-minute chart below, it also weighed on the Australian dollar in the second half of Friday’s trading session.
Looking to the day ahead, it looks set to be a quiet one with few major market-moving releases scheduled domestically, in Asia or abroad.
In Australia, the government will release its mid-year economic and fiscal outlook (MYEFO) at 12.15pm AEDT, an outcome that is likely to be of more importance to political commentators than it will be to financial markets.
“We do not expect much of an AUD reaction to today’s release of the government Mid Year Economic and Fiscal Outlook,” says Haddad.
Strong employment growth and firmer commodity prices have helped to strengthen Australia’s underlying budget position for 2017/18, an scenario that has been completely factored in by financial markets. And the out-year figures are based off forecasts, not actual outcomes, meaning this release often comes and goes without creating a ripple across markets.
Aside from the MYEFO, Australian new car sales data for November will be released at 11.30am AEDT.
Regionally, Japanese trade and Chinese new house price data for November will be released at 10.50am and 12.30pm AEDT respectively.
Later in the session, data highlights include final eurozone inflation figures for November along with CBI Industrial Orders for December from the UK.