The Australian dollar gets a lift as risk appetite improves

Chris Hopkins/Getty Images
  • The Australian dollar rose against the greenback on Monday as investor risk appetite improved.
  • Ahead of another vote on UK PM’s Brexit deal later today, the British pound surged.
  • The economic calendar is busy in Australia on Tuesday, headlined by the NAB’s February business survey and home loan lending data for January.

The Australian dollar ground higher to start the week, reversing early weakness as investor risk appetite improved.

Here’s the scoreboard at 8.10am in Sydney on Tuesday.

AUD/USD 0.7068 , -0.0001 , -0.01%
AUD/JPY 78.59 , -0.03 , -0.04%
AUD/CNH 4.7572 , -0.002 , -0.04%
AUD/EUR 0.6284 , 0.0001 , 0.02%
AUD/GBP 0.5374 , -0.0001 , -0.02%
AUD/NZD 1.0341 , -0.0006 , -0.06%
AUD/CAD 0.9466 , -0.0002 , -0.02%

After opening the session at .7045, the AUD/USD eased lower in early Asian trade, weighed down by weak Chinese inflation and monetary growth figures for February released over the weekend.

After trying not once but twice to break below .7025, the AUD/USD began to reverse course late in the Asian session, helped by another late surge in Chinese stocks.

That positive sentiment flowed through to European and North American trade, seeing the AUD/USD lift to as high as .7077 before easing marginally into the close.

The release of stronger-than-expected US retail sales data for January did little to help the greenback’s cause, partially because of downward revisions to already weak retail spending in December.

Instead, the improvement in risk appetite helped to lift other major currencies, including the Aussie dollar.

“It has been a risk on night with US equities leading the gains,” said Rodrigo Catril, Senior FX Strategist at the National Australia Bank (NAB).

“A better than expected January US retail sales print has been one supporting factor despite downward revisions to what was already a soft December number. The improvement in risk sentiment has seen the USD ease up a little over the course of the night with the DXY and BBDXY indices down 0.07% and 0.12% respectively.”

Investing.comAUD/USD Hourly Chart

Along with renewed optimism among traders, the US dollar was also weighed down by strong gains in the British pound ahead of a meaningful vote on Theresa May’s latest Brexit withdrawal agreement that will occur in the early hours of Wednesday morning on Australia’s eastern seaboard.

“The lift in British pound follows a news report that UK PM May will visit Strasbourg for last minutes talks with the European Union to seek a better Withdrawal Agreement,” said Joseph Capurso, Senior Currency Strategist at the Commonwealth Bank.

“We see little chance of substantial change to the withdrawal agreement.”

Turning to the day ahead, there’s plenty of data events around to keep traders on their toes.

Domestically, there’ll be plenty of interest on the NAB’s latest Australian business confidence survey that will arrive at 11.30am AEDT.

“Given the RBA’s focus on the labour market, we will be closely watching the capacity utilisation sub index which leads the unemployment rate by around six months,” said Catril at the NAB.

“Last month’s survey suggests unemployment could tick higher over the next six months to 5.5% from 5.0%.”

Alongside the NAB survey, the ABS will also release housing finance data for January with the number of owner-occupier loans expected to decline by 2%, according to economists surveyed by Bloomberg.

The value of owner-occupier loans is expected to remain flat from December while finance extended to investors is tipped to slide by a further 1.5%.

Guy Debelle, RBA Deputy Governor, will also deliver a speech on “Climate Change and the Economy” at 6pm in Sydney. While an interesting topic, whether it will move financial markets is questionable.

There’s very little else on the regional calendar, opening the door for Chinese financial markets, along with headlines and technicals, to dictate terms in the second half of Asian trade.

Later in the session, the main highlights will be monthly GDP, industrial output and trade figures from the UK along with core CPI and NFIB small business optimism from the United States.

The US CPI release will garner most attention with headline and underlying CPI expected to increase 1.6% and 2.2% respectively from a year earlier in February.

The Brexit vote in the UK House of Commons is also an event that could lead to significant volatility in the British pound.

“If the House of Commons accepts the latest Brexit deal the GBP should appreciate by 4-5% against most major currencies,” said Capurso at the CBA.

If the House of Commons rejects the Brexit deal… a vote on whether to leave the EU without a deal will be held on Thursday morning Sydney time.

“We believe GBP would fall 4% to 8% if the Parliament agrees to a hard Brexit, but a majority of MP’s are against a hard Brexit.”

Business Insider Emails & Alerts

Site highlights each day to your inbox.

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