- The Australian dollar rallied hard on Wednesday, assisted by stronger domestic data from home and abroad and more positive chatter about trade negotiations between China and the United States.
- The US dollar lost ground on the improvement in risk appetite as well as softer US economic data.
- There’s not a lot on the economic calendar on Thursday. US non-farm payrolls for March will be released on Friday.
The Australian dollar’s roller coaster rise continued on Wednesday, rallying hard on stronger domestic data from both home and abroad and more positive chatter that trade negotiations between China and the United States are moving closer to a conclusion.
However, like a roller coaster ride, despite the ongoing gaily swings, it’s not really going anywhere, at least from a longer-term perspective.
First, here’s how the Aussie is currently faring against the major crosses at 8am in Sydney on Thursday.
AUD/USD 0.7111 , 0.0041 , 0.58%
AUD/JPY 79.27 , 0.57 , 0.72%
AUD/CNH 4.7746 , 0.0201 , 0.42%
AUD/EUR 0.6329 , 0.002 , 0.32%
AUD/GBP 0.5404 , 0.0021 , 0.39%
AUD/NZD 1.0487 , 0.0028 , 0.27%
AUD/CAD 0.9491 , 0.0062 , 0.66%
The big gains came courtesy of surprisingly strong Australian retail sales growth in February, along with news that Australia’s trade surplus jumped to the highest level on record on the back of soaring iron ore prices.
Along with strength in local data, sentiment was also helped by stronger services PMI reports from China and Europe, helping to improve investor sentiment towards the outlook for the global economy.
Reports of further progress in trade negotiations between the US and China, as talks between the two sides resumed in Washington, also worked in the Aussie’s favour during the session.
“The US is said to set a 2025 target for China to meet trade pledges,” said Rodrigo Catril, Senior FX Strategist at the National Australia Bank.
“The plan would see China committing by 2025 to buy more US commodities, including soybeans and energy products, and allow 100% foreign ownership for US companies operating in China as a binding pledge that can trigger retaliation from the US if left unfulfilled.”
Along with an improvement in risk appetite, helping to lift stocks around the world, news that US service sector activity improved at the slowest pace since the middle of 2017 in March, along with a sharp slowdown in private-sector hiring over the same period, saw the greenback lose ground against most major crosses, allowing the AUD/USD to lift back towards .7130 before giving back ground towards the close.
The Aussie also had a good session against the Japanese yen, reflective of the broader mood across markets. It also gained against the euro and British pound despite a string of data beats in the euro-area and renewed optimism towards a potential for a Brexit withdrawal agreement finally being approved by the UK House of Commons.
UK Labor Party Leader Jeremy Corban met with Prime Minister Theresa May to discuss the Brexit options,” said Richard Grace, Chief Currency Strategist at the Commonwealth Bank. “The outcome of the talks was described as “constructive’. Talks will resume again on Thursday.”
After a frenetic few days in terms of economic data, the events calendar will slow sharply on Thursday, hinting there may be limited moves today ahead of the key US non-farm payrolls report for March released on Friday.
“The light calendar today suggest market may look to consolidate recent moves ahead US Payrolls tomorrow,” said Catril at the NAB.
Of the data releases on Thursday, German factory orders, UK construction PMI and initial jobless claims from the US are the headline acts.
The minutes of the ECB’s March monetary policy meeting will also be released while US FOMC members Mester and Williams are also scheduled to be in action.
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