The Australian dollar ended October with a whimper

Pam Ishiguro / Barcroft Images / Barcroft Media via Getty Images

The Australian dollar ended October with a whimper, sliding lower on the back of soft Chinese economic data and month-end window dressing.

Here’s the scoreboard as at 7.50am AEDT.

AUD/USD 0.7655 , -0.0032 , -0.42%
AUD/JPY 86.99 , 0.00 , 0.00%
AUD/CNH 5.0763 , -0.0242 , -0.47%
AUD/EUR 0.6572 , -0.0025 , -0.38%
AUD/GBP 0.5763 , -0.0056 , -0.96%
AUD/NZD 1.1182 , 0.0006 , 0.05%
AUD/CAD 0.9868 , 0.0008 , 0.08%

After opening the session at .7687, the AUD/USD hit a high of .7698 in Asia before retreating on the release of soft economic data, firstly from Australia and secondly from China.

The failure to break above .7700 lead to a renewed bout of selling pressure, exacerbated by month end-window-dressing.

The AUD/USD is currently on track to close the month down over 2%, continuing the weakness seen in August and September. The New Zealand dollar, also down heavily in October, was an underachiever during the session, adding weight to the view month-end positioning may have contributed to Tuesday’s weakness.

The Aussie’s cause was not helped by the release of more strong economic data in the United States.

US consumer confidence jumped to a 17-year high while employment costs rose by 0.7% in the September quarter, leaving the annual increase at 2.5%, the highest level since early 2015.

Manufacturing data from Chicago also topped expectations ahead of the release of the ISM US manufacturing PMI report on Wednesday.

As a result, the AUD/USD is currently trading at .7655.

AUD/USD Hourly Chart

Turning to the day ahead, it will be a busy one with the main event arriving late in the session, the US Federal Reserve’s October monetary policy decision.

“The FOMC is widely expected to make no changes to policy tomorrow following the September decision to gradually pare back its balance sheet,” says Joseph Capurso, senior currency strategist at the Commonwealth Bank.

“The risk is a hawkish statement and a stronger USD,” he adds.

The Fed’s monetary policy statement will be released at 5am AEDT. There will be no economic forecasts or press conference from Janet Yellen at this meeting.

Before that event arrives, there’s a constant flow of economic data scheduled in Asia and Europe.

In Australia, the Ai Group will release its October Performance of Manufacturing Index (PMI) at 9.30am AEDT. That will be followed 30 minutes later by CoreLogic’s Home Value Index for October. A soft month for house price growth is expected.

The Reserve Bank of Australia will also release its monthly commodity price index at 4.30pm AEDT.

None of the Australian data releases will cause a major reaction in the Aussie dollar.

Regionally, New Zealand will release September quarter employment data at 8.45am AEDT.

“[We] expect a 0.7% employment rebound and a 0.1 percentage point fall in unemployment to 4.7%. The market also expects a 0.7% gain in jobs, but a steady unemployment rate,” says David de Garis, Economist at the National Australia Bank.

Elsewhere there’ll be a plethora of manufacturing PMI prints arriving from China, Japan, South Korea and India. Of all the reports, the Caixin-IHS China manufacturing PMI appears the most likely to generate some market volatility.

South Korea will also release CPI and trade figures for October, the latter providing an early snapshot on global trade strength last month.

Outside of the Fed decision, markets will also receive the ADP National Employment report for October from the US, providing an early indication on the likely strength in the official non-farm payrolls report that will be released on Friday.

The US ISM manufacturing PMI report for October and construction spending for September will also arrive during the session.

The PMI is expected to come in at 59.5, down from 60.8 in September.

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