The Australian dollar rally reverses

Nathan Stirk/Getty Images
  • The Australian dollar weakened against all major crosses except the Kiwi on Wednesday.
  • The catalyst for the weakness was unclear, although some cited renewed concern over US-Sino trade negotiations.
  • The British pound was quiet after the UK government survived a no-confidence motion.
  • Australian housing finance data will be released on Thursday.

The Australian dollar weakened against most major crosses on Wednesday, a performance in stark contrast to that seen 24 hours earlier.

Here’s the scoreboard at 8am in Sydney on Thursday.

AUD/USD 0.7173 , -0.0027 , -0.38%
AUD/JPY 78.19 , -0.06 , -0.08%
AUD/CNH 4.8509 , -0.0263 , -0.54%
AUD/EUR 0.6294 , -0.0014 , -0.22%
AUD/GBP 0.5567 , -0.0032 , -0.57%
AUD/NZD 1.0575 , 0.0016 , 0.15%
AUD/CAD 0.951 , -0.0042 , -0.44%

Despite solid gains in global stocks and commodity markets, the Aussie weakened against all the majors except the Kiwi. As for the reason behind the under-performance of the antipodean currencies, Ray Attrill, Head of FX Strategy at the National Australia Bank, said there was no clear catalyst to explain the reversal.

“There are some suggestions that weakness overnight might owe something to positioning in front of important Q4 CPI numbers and the risk of weak numbers,” he said.

AUD is also weaker, falling below the local session lows we saw after yesterday’s weak consumer confidence reading.

New Zealand’s CPI report will be released next week, with Australia’s report due on January 30.

Attrill said reports of no real progress in US-Sino trade talks last week may have also undermined the Aussie and Kiwi.

“There were also some comments from US trade representative Robert Lighthizer suggesting he’d seen little sign of movement from China on some of the key trade issues, which might have produced a bit of delayed reaction on AUD and NZD,” he said.

The AUD/USD hit a session low of .7162 in early North American trade before inching higher towards the close.

Investing.comAUD/USD 30-Minute Chart.

The US dollar may have found support from continued pessimism towards the Euro, following dovish remarks from ECB President Mario Draghi on Tuesday, along with a small improvement in US home builder sentiment as measured by the US NAB survey.

Some pointed to the release of the US Fed’s Beige Book on economic conditions as another factor behind the greenback’s strength, although the charts suggest it had negligible impact on markets.

“All districts noted that labour markets were tight and that firms were struggling to find workers at any skill level, so no real signs of economic slowdown here,” Attrill said.

The Aussie also lost ground against Chinese yuan, finally disconnecting after largely moving in lock-step earlier in the week. The British pound also gained as the UK government survived a no-confidence motion, leading to further speculation that an extension to the Article 50 deadline or a second referendum could take place.

The Canadian dollar was also supported by further gains in crude oil prices.

Turning to the session ahead, it promises to be another quiet one on the data front with few major releases scheduled.

The main highlights will be home loan lending data from Australia, Eurozone CPI and construction output along with jobless claims and Philly Fed manufacturing survey from the United States.

For the Aussie data, loans to owner-occupiers are expected to decline by 1.5%. Markets will be looking at the total value of loans approved and average loan sizes given heightened concern about the impact tighter lending standards is having on the broader housing market.

The report will arrive at 11.30am AEDT.

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