The Australian dollar continues to grind higher

RODGER BOSCH/AFP/Getty ImagesTough slog higher.
  • The Australian dollar recovered from earlier losses to close Tuesday’s trading session higher, repeating the price action seen one day earlier.
  • A slight pullback in US bond yields, along with strong gains in emerging market currencies and commodities and dovish commentary from US President Donald Trump, largely explains the Aussie’s recovery.
  • The economic data calendar is quiet in Asia, pointing to the likelihood that sentiment, technicals, positioning and headlines will dictate direction.

The Australian dollar recovered from earlier losses to close Tuesday’s trading session higher, a near carbon copy of the price action seen one day earlier.

A slight pullback in US bond yields, along with strong gains in emerging market currencies and commodities, largely explains the Aussie’s recovery.

Here’s the scoreboard at 8am in Sydney.

AUD/USD 0.7102 , 0.0026 , 0.37%
AUD/JPY 80.2 , 0.08 , 0.10%
AUD/CNH 4.9116 , 0.0165 , 0.34%
AUD/EUR 0.6178 , 0.0022 , 0.36%
AUD/GBP 0.5403 , -0.0002 , -0.04%
AUD/NZD 1.0970 , 0.0001 , 0.01%
AUD/CAD 0.9196 , 0.0024 , 0.26%

After trading moderately higher for most of the Asian session, the AUD/USD dipped to as low as .7055 in European trade, reflecting a renewed bout of investor nerves surrounding Italy’s fiscal outlook ahead of a key meeting with the European Commission early next week.

However, a breakthrough in Brexit negotiations on the Northern Irish border, along with a slight decline in US bond yields, saw traders reverse earlier buying in the greenback, allowing all major currencies, including the Aussie, to recover.

Further push-back from US President Donald towards continued rate hikes form the Federal Reserve did nothing to help the greenback’s cause.

“I think we don’t have to go as fast,” he said on the future path of Fed rate hikes, adding that “I don’t want to slow it down [the economy] even a little bit” given weakness in inflation.”

Stronger commodity prices, including iron ore, as well as a rebound in the offshore-traded Chinese yuan and other emerging currencies, also helped to boost sentiment towards the Aussie.

Combined, that helped the AUD/USD push back above the .7100 level in the latter parts of trade.

Investing.comAUD/USD Hourly Chart

Turning to the day ahead, sentiment, technicals, positioning and headlines, rather than economic data, will likely dictate broader movements in currency markets given a relatively-light calendar.

In Australia, the latest Westpac-MI consumer sentiment survey for October will be released at 10.30am AEDT. That will be followed a hour later by Q2 construction data from the ABS.

Regionally, New Zealand electronic retail sales and Japanese machine orders data will be released. Updated Chinese lending figures for September could also hit at any point in the coming days. Given recent stimulus measures announced by China’s central bank and government, there’ll naturally be a lot of interest on the release.

Later in the session, data highlights include industrial production, trade and monthly GDP data from the UK, Italian industrial output, Canadian building permits and producer price inflation and wholesale inventories from the United States.

On the central bank front, John Williams, New York Fed President will speak from 12.15pm AEDT. Andy Haldane from the BoE, Yves Mersch of the ECB and Evans and Bostic from the US Fed will all be in action in the second half of the session.

NOW WATCH: Money & Markets videos

Business Insider Emails & Alerts

Site highlights each day to your inbox.

Follow Business Insider Australia on Facebook, Twitter, LinkedIn, and Instagram.