The Australian dollar remains volatile as traders await the outcome of Trump and Xi’s dinner date

  • The Australian dollar whipped around on Thursday, rising in Asian and European trade before giving back ground in the latter parts of the session.
  • There was little reaction to US economic data released during the session, nor the release of the minutes of the Fed’s November monetary policy meeting. Everyone is waiting for the outcome from the Xi-Trump meeting on Saturday at the G20 summit.
  • While speculation ahead of that event will likely dictate broader market direction today, there is a raft of major data releases scheduled in Asian and European trade.

The Australian dollar followed a familiar pattern on Thursday, lifting in Asian and European trade before giving back ground in the second half of the session.

Here’s the scoreboard at 8.20am in Sydney on Friday.

AUD/USD 0.7315 , 0.0011 , 0.15%
AUD/JPY 82.98 , -0.04 , -0.05%
AUD/CNH 5.0713 , 0.0034 , 0.07%
AUD/EUR 0.6422 , -0.0003 , -0.05%
AUD/GBP 0.5722 , 0.0029 , 0.51%
AUD/NZD 1.0666 , 0.004 , 0.38%
AUD/CAD 0.972 , 0.002 , 0.21%

The whippy price action in the AUD/USD was almost identical to those in global stocks, and the offshore-traded yuan, reflecting that plenty of traders are now sitting on the sidelines ahead of a key meeting between Donald Trump and Xi Jinping on Saturday.

“Markets have been choppy amid varying views on the prospect of any sort of trade deal this weekend between Trump and Xi at the G20,” David de Garis, Economist at the National Australia Bank.

“The WSJ reported that the US and China are ‘looking to defuse tensions and boost markets, are exploring a trade deal in which Washington would suspend further tariffs through the spring in exchange for new talks looking at big changes in Chinese economic policy’.

“Separately, the South China Morning Post reported that White House advisor Pewter Navarro — a China hawk — will now attend the Xi-Trump dinner this weekend after reports last week that he wouldn’t.”

There was little to no reaction to US economic data released during the session, including a small undershoot in US core PCE inflation which grew by just 0.1% in October seeing the year-on-year rate decelerate to 1.8%, moving further away from the 2% level targeted by the US Federal Reserve.

The core PCE inflation figure is the Fed’s preferred measure of gauging price pressures.

Other US data was mixed: weekly jobless claims rose to a six-month high — perhaps driven by the Thanksgiving holiday or perhaps a sign that labour market conditions are softening — while household consumption and incomes data for October was strong, lifting by 0.6% and 0.5% respectively, ahead of market expectations.

Nor was there much reaction to the minutes of the Federal Reserve’s November FOMC meeting.

“The FOMC minutes said another rise in the Fed funds rate would likely be warranted ‘fairly soon’, but introducing more flexibility ahead, members discussed modifying the language on gradual rate hikes ahead,” de Garis said.

Some regarded the last statement to be another dovish development, although the mixed price action following the release of the minutes suggests not everyone is convinced.

With less than a hour left to trade on Thursday, the AUD/USD currently sits at .7315, up 0.15% from where it began the session.

At the margin, a spike in global crude prices may have helped support the Aussie against the major crosses on Thursday.

AUDUSD Hourly Chart.

Turning to the day ahead, there’s a raft of economic data that will be released in Australia, Asia and abroad. However, with the Trump-Xi meeting fast approaching, it’s debatable whether markets will actually care.

Domestically, private sector credit figures for October will be released at 11.30am AEDT with all attention likely to be on the housing component given a recent acceleration in price declines in Sydney and Melbourne.

In Japan, unemployment, industrial output, housing starts, construction orders, consumer confidence and Tokyo inflation data will be released while in China manufacturing and non-manufacturing PMIs for November will also arrive at midday AEDT.

The latter could attract some interest, especially the new export orders component.

Later in the session, other highlights include German retail sales and import prices, Eurozone CPI, UK house prices, Italian and Canadian GDP along with the Chicago Fed manufacturing index in the United States.

New York Fed President John Williams — seen as centrist on the FOMC — will also speak, providing another opportunity for markets to dissect whether the Fed has truly turned dovish in recent weeks.

Finally, the G20 meeting gets underway, although markets won’t get the opportunity to react to the Xi-Trump meeting until trade resumes on Monday morning in Asia.