The Australian dollar reverses hard as trade uncertainty returns

Daniel Berehulak / Getty Images
  • The Australian dollar fell heavily on Wednesday, giving back much of the gains seen earlier in the week.
  • Renewed uncertainty about US-Sino trade negotiations was the main catalyst behind the weakness.
  • Optimism that a hard Brexit will be avoided helped to push the British pound to fresh multi-month highs.
  • Australia Q4 CAPEX and private sector figures will be released today. US Q4 GDP will also be released. The Fed calendar is also busy with many speeches scheduled.

The Australian dollar fell heavily on Wednesday, giving back much of the gains seen earlier in the week.

Not-so-positive news on the state of US-Sino trade negotiations was the chief catalyst behind the Aussie’s reversal of fortunes.

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

AUD/USD 0.7138 , -0.0048 , -0.67%
AUD/JPY 79.22 , -0.24 , -0.30%
AUD/CNH 4.7698 , -0.0343 , -0.71%
AUD/EUR 0.6272 , -0.0032 , -0.51%
AUD/GBP 0.5364 , -0.0059 , -1.09%
AUD/NZD 1.0428 , -0.0002 , -0.02%
AUD/CAD 0.9387 , -0.0077 , -0.81%

The broad-based declines were driven by cautious remarks on the current state of US-Sino trade negotiations from US Trade Representative Robert Lighthizer.

“Comments by US Trade Representative Lighthizer dimmed positive expectations about a near term trade deal between the US and China,” said Joseph Capurso, Senior Currency Strategist at the Commonwealth Bank.

Appearing before the US House Ways and Means Committee, Lighthizer cast doubt on the prospect of a near-term major trade breakthrough.

“Much still needs to be done, both before an agreement is reached, and more importantly, after it is reached,” Lighthizer said.

The view, tempering optimism sparked by remarks on trade negotiations from US President Donald Trump earlier in the week, saw the AUD/USD slide from a high of .7198 to a low of .7128. Similar declines were seen against most major pairs, although the losses against the British pound were amplified by continued optimism that a “hard Brexit” will be avoided.

Investing.comAUD/USD Hourly Chart

Turning to the day ahead, it will be a busy one for Aussie dollar traders with two key releases set to arrive midway through the Asian session.

The first is Australia’s Q4 CAPEX report at 11.30am AEDT, the latest piece of Australia’s Q4 GDP jigsaw puzzle. The CAPEX report is unique that it measures both investment that’s occurred in the past and what’s expected in the future.

Given weakness in the GDP inputs received so far, this report will garner more attention that usual.

This 10-second guide has more on what to look out for in the report, including what figures may drive any subsequent market reaction.

Alongside the CAPEX report, the Reserve Bank of Australia (RBA) will also release private sector credit figures for January.

As is often the case, most attention will be on the housing components given the link between credit growth and home prices. With business confidence and conditions also softening in early 2019, business credit will also be of interest.

Across the broader Asian region, markets will also receive Japanese and South Korean industrial production data, manufacturing and non-manufacturing PMI data from China along with the latest NBNZ business confidence reading from New Zealand.

Later in the session, other highlights include UK home prices, French GDP and consumer spending, German, French, Italian and Spanish inflation along with Challenger job cuts, jobless claims, Q4 GDP, Chicago PMI and Kansas City Fed manufacturing index in the United States.

It will also be a busy session on the Fed front with Clarida, Bostic, Harker and Kaplan all scheduled to be in action.

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