The rebound in the Australian dollar is over -- for now

Massimo Bettiol/Getty Images
  • The Australian dollar fell heavily on Monday, weighed down by renewed concern over trade negotiations between China and the United States.
  • Along with the Kiwi dollar, it was among the worst performing major currencies during the session.
  • The data calendar is quiet both domestically and abroad today, pointing to the likelihood that the performance of the Chinese yuan will dictate movements in the Australian dollar in Asia.

The rebound in the Australian dollar came to an abrupt end on Monday, falling heavily as concerns about trade negotiations between the United States reignited.

Here’s the scoreboard as at 6.35am in Sydney.

AUD/USD 0.7253 , -0.0036 , -0.49%
AUD/JPY 81.8 , -0.02 , -0.02%
AUD/CNH 4.9820 , 0.0035 , 0.07%
AUD/EUR 0.6173 , -0.0014 , -0.23%
AUD/GBP 0.5529 , -0.0029 , -0.52%
AUD/NZD 1.0917 , 0.0034 , 0.31%
AUD/CAD 0.9392 , -0.0021 , -0.22%

After briefly trading above the 73 cent level on Friday, the AUD/USD came under selling pressure from the get-go on Monday, falling over half a percent on news that China had cancelled trade talks with the United States ahead of the impending introduction of new US tariffs on Chinese imports.

They’ve now being implemented, and Chinese policymakers have responded in kind by introducing new tariffs on US imports of their own.

“[The] AUD was pushed lower by falling equity markets and the official start of phase two of US tariffs on imports from China, and vice versa,” said Joseph Capurso, Senior Currency Strategist at the Commonwealth Bank.

While hardly surprising news that trade talks were abandoned, given a lack of first-tier economic data released on Monday, along with public holidays in many major markets across Asia, it was enough to keep the Aussie under pressure for the entirety of the session.

The AUD/USD traded as low as .7250 before closing at .7252.

Investing.comAUD/USD Hourly Chart

Against the crosses, the Aussie also came under selling pressure against the euro, British pound as well as the Canadian dollar.

The euro was supported by hawkish remarks from ECB President Mario Draghi who stated that he sees a “relatively vigorous pick-up in underlying inflation” in the period ahead. Those remarks helped to lift the EUR/USD to a three-month high above 1.1800 before giving back all of those gains in the latter parts of the session.

After plunging on Friday on renewed Brexit uncertainty, the GBP managed to crawl off the mat, likely assisted by short covering ahead of major central bank events ahead.

Unlike the remaining commodity currencies, the Canadian dollar was supported by strength in crude oil prices which hit the highest level in four years during the session.

Turning to the session ahead, it promises to be a quiet one for traders in Asia despite the return of major markets such as China and Japan following public holidays on Monday.

There’s no major data releases scheduled on Tuesday, although Bank of Japan Governor Kuroda is scheduled to speak in late Asian trade.

Given the quiet data calendar, the Aussie is likely to take its cues from movements in the Chinese yuan given the two currencies gyrated in tandem throughout Monday’s session.

Any headlines related to trade policy from China will also carry the potential to shift broader sentiment levels.

Later in the day, data highlights include German wholesale price inflation as well as house price releases and the Richmond Fed manufacturing index from the United States.

If anything, central bank speeches could take centre stage today with Praet and Coeure from the ECB, and Vlieghe from the Bank of England, all scheduled to talk during the session.

And given the US Fed and RBNZ will announce interest rate decisions early on Thursday morning in Asia, Capurso at the CBA isn’t expecting much excitement in the lead up to those events.

“There is very little happening in Australia this week that will move AUD much. The main influences on AUD are the RBNZ and the FOMC,” he says.

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