- The Australian dollar hit a one-week high against the greenback on Tuesday.
- The British pound jumped as the odds of a hard Brexit receded.
- Australian Q4 Construction work done will be released today — parts will feed directly into Australia’s Q4 GDP report next week.
- The economic data flow will increase as the session progresses. It’s busy in the United States.
The Australian dollar continued to gain ground against the greenback on Tuesday, adding to the gains seen earlier in the week.
However, it put in a mixed performance against the crosses.
Here’s the scoreboard at 8.10am in Sydney on Wednesday.
AUD/USD 0.7187 , 0.0022 , 0.31%
AUD/JPY 79.45 , -0.12 , -0.15%
AUD/CNH 4.8054 , 0.018 , 0.38%
AUD/EUR 0.6308 , 0.0001 , 0.02%
AUD/GBP 0.5421 , -0.0049 , -0.90%
AUD/NZD 1.0417 , 0.001 , 0.10%
AUD/CAD 0.9466 , 0.0016 , 0.17%
After starting the day at .7165, the AUD/USD initially fell in Asian trade, weighed down by profit-taking in stocks after a strong run on Monday. The move also coincided with modest weakness in the Chinese yuan which hit a multi-month high against the greenback a session earlier.
However, after bottoming at .7143, the AUD/USD recoup those early losses and more as European markets opened, finding further support later in the session following an appearance by Fed Chair Jerome Powell before the US Senate Banking Committee.
“Powell reiterated that the Fed would be ‘patient’ with interest rates,” said FX Strategists at the National Australia Bank.
“He said the US economy remained healthy, although it faced ‘crosscurrents’ from more volatile financial markets, slowing growth in China and Europe, and uncertainty around US-China trade negotiations and Brexit.
“On the more dovish side, Powell noted that people were being pulled back into the labour market, which had created more room for the US economy to grow without overheating.”
While nothing earth-shattering, once Powell stopped talking the US dollar index weakened as US 10-year treasury yields eased modestly, helping to send the AUD/USD to as high as .7194, a level it continues to trade with around a hour left to trade.
US economic data was mixed during the session — consumer confidence rebounded strongly, as did the Richmond Fed manufacturing index, although housing starts and home price growth both undershot market expectations.
Contributing to the weakness in the greenback, the British pound jumped to a five-month high as fears over a potential hard Brexit continued to ease.
UK Prime Minister Theresa May told parliament that if they rejected her updated Brexit Withdrawal Agreement on March 12, they will have the option of voting to leave the EU on March 29th without a deal, possibly on March 14.
May’s remarks saw the GBP/USD lift to as high as 1.3288, a level not seen since September 2018.
The move in the pound also helped to spur buying in the euro, heaping further pressure on the greenback.
Turning to the day ahead, there’s a steady stream of data that carries the potential to generate short-term volatility in the Aussie dollar.
Data on Australian construction work undertaken in the December quarter be released at 11.30am AEDT, providing the next partial inputs ahead of Australia’s Q4 GDP report next week.
“[It] will be important in so far as the both the private residential and non-residential work done numbers feed into next week’s GDP figures,” says the NAB’s FX Strategy team.
“The NAB expects residential work done declined 2.2% in Q4, following the 1% decline in Q3. For private engineering work, we are forecasting a 3% decline — linked to the ongoing completion of major LNG projects — more than offsetting an expected 2.5% quarterly rise in public engineering work.”
Aside from that release, markets will also receive New Zealand trade data for January at 8.45am AEDT in Asia.
Later in the session, the main highlights will be monetary growth and consumer confidence figures from the Eurozone, Canadian CPI along with the advanced goods trade balance, factory orders, pending home sales and crude oil inventory data from the EIA in the United States.
US Fed Chair Jerome Powell will also be in action, this time before the House Financial Services Committee. Not much “new” news is expected.
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