The Australian dollar eases lower on renewed Chinese economic jitters

Darrian Traynor/Getty Images
  • The Australian dollar eased lower against most major crosses on Monday.
  • Disappointing corporate earnings reports, largely blamed on an economic slowdown in China, weighed on risk assets during the session.
  • Australian business confidence data for December will be released on Tuesday.

The Australian dollar eased lower against most major crosses on Monday, partially reversing strong gains seen a session earlier.

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

AUD/USD 0.7168 , -0.0014 , -0.19%
AUD/JPY 78.39 , -0.31 , -0.39%
AUD/CNH 4.8390 , -0.0112 , -0.23%
AUD/EUR 0.6270 , -0.0029 , -0.46%
AUD/GBP 0.5445 , 0 , 0.00%
AUD/NZD 1.0490 , 0.0001 , 0.01%
AUD/CAD 0.9498 , 0.0007 , 0.07%

After briefly climbing above the .7200 level in Asian trade, leaving it at the highest the highest level since January 18, the AUD/USD began to slide in European trade, undermined by disappointing profit result from Caterpillar and Nividia that were blamed on a slowdown in the Chinese economy.

“The new week has begun with a broad risk-off tone as Caterpillar and Nvidia reveal disappointing earnings reports citing a slowdown in Chinese demand for their struggles. Caterpillar and Nvidia are not the first companies to blame China for their afflictions, but both companies are seen as industry bellwethers and their disappointing results provide further evidence that this time China’s slowdown is for real,” said Rodrigo Catril, Senior FX Strategist at the National Australia Bank.

“Caterpillar posted its biggest quarterly profit shortfall in a decade while guidance for 2019 was well short of analysts’ estimates. The company now expects no sales growth from in China this year and only a ‘modest’ increase worldwide.

“Meanwhile, shares in US graphics chipmaker Nvidia fell almost 15% after it unexpectedly revised its revenue guidance for 2019 sharply lower, blaming ‘deteriorating macroeconomic conditions, particularly in China’.”

The twin profit disappointments weighed on cyclical assets such as commodities and stocks, as well as the Australian dollar. In contrast, safe-haven currencies such as the Japanese yen and Swiss franc fared well, as did the euro given its the large current account surplus run by the euro-area. US treasuries were also in demand after losing ground earlier in the day.

Investing.comAUD/USD Hourly Chart

The Aussie was unchanged against the British pound as caution crept in ahead of another vote in the UK House of Commons today for Theresa May’s latest Brexit deal.

“GBP/USD has edged lower after UK Prime Minister Theresa May, in an attempt to win UK Parliamentary support, effectively abandoned the Withdrawal Agreement by indicating she will strip out the Irish backstop part of the Withdrawal Agreement,” said Richard Grace, Chief Currency Strategist at the Commonwealth Bank.

“This risks being rejected by the EU who earlier indicated they were not willing to change the Withdrawal Agreement and increases the chance of the UK stumbling out EU with no deal Brexit on 29 March.”

The Aussie did manage to push higher against the Canadian dollar courtesy of a big 3% plunge in crude oil futures during the session.

Turning to the day ahead, the data calendar is fairly quiet once again leaving headlines, positioning and technicals to dictate broader direction.

Regionally, New Zealand trade data for December will be released at 8.45am AEDT. That will be followed at 11.30am AEDT by the National Australia Bank’s latest Australian business confidence survey for December.

Given recent declines in other alternate business confidence indicators, risks to the surveys confidence and conditions subindex of +3 and +11 in November appear to be slanted to the downside.

Later in the session, US home price and consumer confidence figures are the other headline acts.

The UK parliamentary vote on the latest Brexit deal is also scheduled to take place at 6am on Wednesday Sydney time.

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