The Australian dollar fell against the greenback on Monday, losing ground as progress on US tax reform and strong economic data helped to lift shorter-dated US bond yields.
As at 8.10am AEDT, the AUD/USD is trading at .7596, down 0.17% for the session.
According to David de Garis, economist at the National Australia Bank, the greenback continued to benefit from a combination of optimism towards US tax reform and strong US economic data, helping to override simmering political uncertainty surrounding the Trump Administration.
“There is continuing speculation in the US press around the Mueller/Russia investigation,” de Garis said in his Tuesday morning note.
“Markets though look to be taking their lead from the likelihood of Congress agreeing on tax cuts and, last night, another positive US economy data print. This one was a better than expected reading on US Factory Orders for October, including an upward revision to the core capital goods orders component.”
De Garis said this helped to boost expectation over further interest rate hikes from the US Federal Reserve seeing the yield on 2-year US government bond yields lift 3.4 basis points to 1.8063%.
While that acted to underpin the greenback to the detriment to the Aussie, the latter managed to eke out modest gains against the Canadian and New Zealand dollars along with the the Japanese yen, helped by improved investor risk sentiment, robust Q3 GDP inputs and another surge in iron ore markets, Australia’s largest goods export by dollar value.
Here’s the current scoreboard.
Turning to the session ahead, it looks set to be a busy one for traders with a series of major data releases scheduled both in Australia and abroad.
Domestically, ANZ will release its weekly consumer confidence report at 9.30am AEDT, the same time as the Ai Group’s November Performance of Services Index (PSI) hits the screens.
Those data points will be followed two hours later by Australian current account and government spending figures for the September quarter, two releases that will play a large role in influencing Wednesday’s Australian Q3 GDP report.
Both net exports and government spending are expected to boost real GDP from an expenditure basis.
Australia’s October retail sales report will also be released alongside the GDP inputs at 11.30am AEDT. After a less-than-stellar run since July, this report carries the potential to generate the most volatility in the Australian dollar today.
Economists expect an increase of 0.3%, an improvement on the flat outcome recorded in September.
Rounding off what is a busy data calendar in Australia, the Reserve Bank of Australia (RBA) will also announce its December monetary policy decision at 2.30pm AEDT.
With rates likely to be left unchanged at 1.5%, all focus will be on the accompanying monetary policy statement for clues to as to when and what direction rates are likely to move next. The tone is likely to be much the same as that seen in November with optimism towards the business sector and labour market likely to be offset by ongoing concern surrounding the household sector and continuing slowdown in the housing market.
Outside of Australia, data highlights include services PMI readings for November from China, Japan, Europe, UK and US. Markets will also receive Eurozone retail sales along with international trade data for October from the US and Canada.
The two US data releases appear the most likely to dictate market direction in the second half of the session.
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