The Australian dollar is tumbling

Martin Steinthaler / Hoch Zwei / Getty Images
  • The Australian dollar fell sharply on Thursday against the US dollar, sliding back towards 72 cents.
  • Weakness in the euro helped to spur buying in the greenback, pushing most major currencies lower.
  • There’s a busy economic calendar scheduled on Friday with major releases coming from Australia, Europe and the United States.

The Australian dollar fell sharply on Thursday against the US dollar.

However, as seen in the scoreboard as at 7am in Sydney, it was not just the Aussie that succumbed to US dollar strength with the greenback screeching higher against most of the major crosses, especially the euro.

AUD/USD 0.7205 , -0.0051 , -0.70%
AUD/JPY 81.7 , -0.10 , -0.12%
AUD/CNH 4.9619 , -0.0289 , -0.58%
AUD/EUR 0.6188 , 0.0007 , 0.11%
AUD/GBP 0.5509 , -0.0002 , -0.04%
AUD/NZD 1.0892 , -0.0008 , -0.07%
AUD/CAD 0.9397 , -0.0054 , -0.57%

After reversing hard in the aftermath of the US Federal Reserve’s September interest rate decision in the early hours of Thursday morning in Asia, the AUD/USD went on with the move throughout the course of the session, falling to as low as .7202 before finding renewed buying support.

Renewed weakness in the euro, sparked by renewed concern over Italy’s fiscal outlook, was the main catalyst behind the move, seeing traders switch out of other currencies in favour of the greenback.

“Markets were steady until late afternoon headlines [in Asia] hit the screen suggesting the Italian government was in a quarrel with the two deputy PMs pushing for an increase in the deficit,” said Rodrigo Catril, Senior FX Strategist at the National Australia Bank.

“The news triggered a sharp drop in the Euro which accelerated after stops were triggered.”

And that move in the euro extended into North American trade with confirmation that Italy’s government has agreed on a 2019 deficit at 2.4% of GDP, larger than 2% level desired by Italy’s economy minister.

Along with renewed US dollar strength, the Aussie was also hurt by the release of soft Chinese industrial profits data during the session. While profits grew 9.2% from a year earlier in August, that was well below the 16.2% level seen in the 12 months to July.

Softer commodity prices, including a sharp reversal in Chinese bulk commodity futures, may have also contributed to the selling pressure.

Interestingly, traders largely ignored largely softer-than-expected US economic data released during the session, as well as a hotter-than-expected preliminary German inflation reading for September.

Investing.comAUD/USD Hourly Chart

Turning to the day ahead, there’s a few events that will likely interest traders, both in Australia and abroad.

Domestically, the RBA will release private sector credit growth for August at 11.30am AEST. There’ll be particular interest on the housing credit figure, especially for investors.

The interim report into Australia’s Banking Royal Commission is also expected to be released, carrying the potential to have a material impact on Australian financial markets, including the Aussie, depending upon the severity of the recommendations made.

Outside of Australia, other data highlights today include New Zealand building permits and consumer confidence, inflation, unemployment, retail trade and industrial production data from Japan as well as the Caixin-IHS Markit China manufacturing PMI report for September.

Of all those releases, the Kiwi consumer confidence and China PMI prints are the most likely to generate a reaction in financial markets.

Later in the session, markets will also receive Eurozone inflation, final Q2 GDP readings from the UK and Spain, German unemployment along with personal consumption and expenditure figures, including core PCE inflation, as well as the latest University of Michigan consumer sentiment survey and Chicago PMI report from the United States.

On the central bank front, Barkin and Williams from the Fed, Praet from the ECB and Ramsden from the BoE are all scheduled to be in action.

Business Insider Emails & Alerts

Site highlights each day to your inbox.

Follow Business Insider Australia on Facebook, Twitter, LinkedIn, and Instagram.