The economic data that moves the Australian dollar the most, according to big data

  • The Australian dollar is among the most traded currencies around the world.
  • Researchers at the Commonwealth Bank have used big data to uncover what major data releases tend to move the AUD/USD the most.
  • Since the GFC, the reaction to data has generally been smaller, the one exception being for US core consumer price inflation (CPI).
  • Prevailing volatility in currency markets prior to data releases is also highly influential. When elevated, the reaction tends to be far greater compared to when volatility is low.

For a relatively small economy, at least compared to global standards, currency traders sure like to punt the Aussie dollar.

Depending on the year, it’s often among the top four to six most-traded currencies worldwide, only surpassed by the likes of the US dollar, Japanese yen and euro.

It certainly punches well above its weight on the global stage, helped by being a free-floating, commodity-linked currency that’s closely tied to the performance of the world’s second-largest economy, China.

Understandably, traders love it.

Given there’s a lot of interest in the currency, it pays to know data releases tend to cause the most short-term volatility in the Aussie when there’s a surprise result, particularly for those who are considering entering or exiting a trade following a major release.

Courtesy of researchers at the Commonwealth Bank (CBA), we now know have a better understanding of what data tends to consistently generate the largest reaction in the AUD/USD in the 30 minutes following its release.

“Four of the top six most impactful data surprises on AUD/USD are from the US,” said Joseph Capurso, Senior Currency Strategist at the CBA. “The top Australian data surprise is quarterly retail volumes.”

The releases that consistently tend to move the AUD/USD are shown in the chart below.


Curiously, a lot of releases that you’d normally expect would move the Aussie — such as Australian CPI, jobs data or GDP — didn’t make the list.

“Our most controversial finding is that some keenly watched economic data such as US non-farm payrolls and Australian employment have an unreliable impact on AUD/USD,” Capurso said.

“We are not saying AUD/USD does not react to these data surprises, it does. Rather, AUD/USD appears to respond inconsistently to surprises in these data.”

Researchers at the bank turned to big data to formulate those findings, analysing 31 specific data releases from Australia, the US and China between January 2010 and December last year, looking at where the AUD/USD was trading before and 30 minutes after each data point was released.

The CBA also used analysis from the Reserve Bank of Australia (RBA) to see how the results before and after the GFC compared.

Compared to pre-GFC era, the CBA found that local and US data releases now have a smaller influence on movements in the AUD/USD.

“It is often said that the GFC changed everything, and this rings true for the way AUD/USD responds to Australian economic data surprises,” Capurso said.

“We find AUD/USD is much less sensitive to the major Australian economic data releases since the GFC. This means AUD/USD now moves by less than it used to for a given Australian data surprise.”

Capurso said that similar trends were also evident in major US releases, with one exception.

AUD/USD has become modestly less sensitive to US economic data surprises since the GFC compared to US economic data surprises before the GFC,” he said.

“There is one exception.

“AUD/USD has become twice as sensitive to US core CPI surprises since the GFC. This could be that US inflation remains a major influence on interest rate rises.”

For Chinese data, the CBA admitted that it had difficulty tracking its influence because not all data points have a set time. Of those that do such as CPI, PPI, GDP and the official manufacturing PMI, it found that none have been reliable influences on AUD/USD since the GFC.

More broadly, the analysis also found that currency volatility prior to data releases also had an impact on the size of moves, noting the AUD/USD tends to react more to data surprises when currency volatility is already high rather than when it is low.

So some interesting tidbits for those who like to trade around major data releases.

However, the CBA acknowledges that there are some short-comings in the analysis, including that it does not incorporate other market events such as government decisions, elections, central bank speeches and unexpected changes to monetary policy.

It also makes the point that the analysis only looks at short-term data drivers for the AUD/USD, rather than longer-term influences such as interest rate differentials and commodity prices, among others.

Therefore, it may be more useful for day traders rather than those looking to place longer-term positions.

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