The Australian dollar is struggling to find traction

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  • The Australian dollar drifted lower in quiet trade on Thursday.
  • Continued dramas over Brexit saw the British pound plunge again. Those dramas look set to continue on Friday.
  • It’ll be a busy end to the week for traders. The economic calendar is busy across all major regions.

The Australian dollar had a quiet session on Thursday, lifting modestly in Asian and European trade before giving back ground in the latter parts of the session.

Here’s the scoreboard at 8am in Sydney on Friday.

AUD/USD 0.7075 , -0.0009 , -0.13%
AUD/JPY 78.28 , 0.00 , 0.00%
AUD/CNH 4.7671 , -0.0055 , -0.12%
AUD/EUR 0.6303 , 0.0004 , 0.06%
AUD/GBP 0.5424 , 0.0054 , 1.01%
AUD/NZD 1.0438 , 0.002 , 0.19%
AUD/CAD 0.9507 , 0.0006 , 0.06%

After beginning the session at .7084, the AUD/USD lifted to as high as .7106 in European trade, helped in part by reports earlier in the session about further progress in trade negations between China and the United States.

However, that move was reversed over the course of North American trade as the US dollar strengthened, perhaps helped by a modest lift in US bond yields after falling heavily a session earlier.

“AUD sits just below 0.7080 from just above 0.7100 at Thursday’s Sydney close, with nothing to report beyond creeping USD strength here,” said Ray Attrill, Head of FX Strategy at the National Australia Bank.

Investing.comAUD/USD Hourly Chart

The rebound in the greenback and US bond yields came despite news that US Q4 GDP was revised down to show an annualised increase of 2.2%, below the 2.4% level expected.

Most European data also undershot expectations with Eurozone business confidence falling to the lowest level since 2016 while German inflation slipped to an annual rate of 1.4%, below the 1.6% pace forecast by economists. That may have contributed to modest weakness in the euro, helping to bolster the US dollar as a consequence.

The big move during the session was in the British pound which fell heavily as traders reacted to a further lift in uncertainty as to when and what form the UK will leave the European Union.

“GBP/USD is about a cent and a half down on where it was at the Sydney close, with the London market reacting for the first time to the news that greeted us yesterday morning, namely that all eight of the possible ways forward out of the Brexit morass had been voted down in the so called indicative votes process,” Attrill said.

Ensuring there’ll be plenty for markets to chew on heading into the weekend, the economic data calendar is jam-packed on Friday with a plethora of releases scheduled in Asia, Europe and North America.

In Australia, the RBA will release private sector credit figures for February at 11.30am AEDT. All interest will be on the housing component, not only because it has been very weak recently but also because it tends to lead movements in home prices by around six months.

Elsewhere, New Zealand build permits will also be released along with unemployment, inflation, industrial output, retail sales, housing starts and construction orders in Japan.

In Europe, the main highlights will be German unemployment and retail sales, Eurozone inflation, UK Q4 GDP and money supply.

Rounding off the busy calendar, the main events in North America will be Canadian GDP and budget figures for January along with personal spending and consumption data, including core PCE inflation, from the United States. The latter is the US Fed’s preferred measure of inflationary pressures.

US new home sales, Chicago PMI and and University of Michigan consumer sentiment will also be released during the session.

Brexit dramas also look set to continue, likely ensuring ongoing volatility in the British pound.

“UK members of Parliament will be asked to vote on Prime Minister Theresa May’s Withdrawal Agreement for the third time later Friday,” said Richard Grace, Chief Currency Strategist at the Commonwealth Bank.

“The vote on the Withdrawal Agreement will not include the part of the package that contains the framework for the future trade and security relationship. Without something decided, the UK will stumble out of the EU without a deal come 12 April.”

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