- The Australian dollar recovered on Wednesday after falling in Asia and Europe, helped by a late bout of US dollar selling.
- The USD selling was prompted by the release of the minutes of the US Fed’s May monetary policy meeting.
- Most of the major data releases today arrive in the second half of the session. It’s also a busy day for central bank activity.
The Australian dollar recovered on Wednesday after falling in Asia and Europe, helped by a late bout of US dollar selling.
It also put in a good showing against most of the major crosses.
Here’s the scoreboard as at 7am in Sydney.
AUD/USD 0.7558 , -0.0017 , -0.22%
AUD/JPY 83.19 , -0.80 , -0.95%
AUD/CNH 4.8183 , 0.0067 , 0.14%
AUD/EUR 0.6460 , 0.003 , 0.47%
AUD/GBP 0.5661 , 0.0024 , 0.43%
AUD/NZD 1.0927 , 0.0006 , 0.05%
AUD/CAD 0.9703 , -0.0001 , -0.01%
After sliding to as low as .7520 on the back of increased geopolitical uncertainty and lower commodity prices earlier in the session, the AUD/USD managed to recoup most of those losses late in North American trade, helped by the release of the US Federal Reserve’s May FOMC minutes, perceived my many to reinforce the view that the Fed won’t adopt a more aggressive rate tightening schedule should inflation move above its 2% annual target.
“The Fed’s tolerance for inflation above 2% as ‘helpful in anchoring longer run inflation’ is a clear sign that even though pressures are rising, the Fed won’t be too aggressive on any uptick,” said Greg McKenna, Chief Market Strategist at AxiTrader.
“So two or three more hikes in 2018 and a continuation of the gradual approach seems to have been reinforced.”
The release of the minutes saw the US dollar reverse some of its early strength, helping the AUD/USD close at .7559, a loss of 0.2% for the session.
While the AUD/JPY still logged a decline of 1%, indicative of increased risk aversion seen on Wednesday, it rallied against the British pound and euro which were weighed down by the release of weak economic data during the session.
UK consumer price inflation decelerated unexpectedly, casting doubt over the likelihood that the Bank of England will increase official interest rates in the months ahead.
Along with ongoing nerves surrounding Italian politics, the euro was also undermined by the release of soft PMI data for May, adding to recent evidence that Euro-area economy is slowing.
Whether the Aussie’s tepid bounce on Wednesday continues today will likely be determined by flows, sentiment and techncials rather than economic data.
There’s no releases scheduled domestically with only a smattering of data released abroad.
In Asia, New Zealand trade figure for April, along with the Bank of Korea’s May interest rate decision, are the headline acts.
Later in the session, markets will also receive German GDP and consumer confidence, retail sales from the UK, along with jobless claims, house prices, existing home sales and Kansas Fed manufacturing index from the United States.
There’s also a raft of central bank speeches scheduled with Dudley, Harker and Bostic from the US Fed, BoE Governor Mark Carney and Peter Praet of the ECB all in action.
The ECB will also release the minutes of its May monetary policy meeting.
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