The Australian dollar is charging higher as the greenback rally wilts

  • The Australian dollar rose strongly on Wednesday, hitting the highest a six-week high against the greenback.
  • The Aussie also rose against all of the major crosses except the Kiwi, the latter helped by an enormous fall in unemployment in the September quarter.
  • China will release trade data for October today. The US Fed will also announce its latest policy decision — no change in rates is either likely or expected.

The Australian dollar rose strongly on Wednesday, hitting the highest level since September 26 against the greenback.

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

AUD/USD 0.7279 , 0.0033 , 0.46%
AUD/JPY 82.65 , 0.47 , 0.57%
AUD/CNH 5.0330 , 0.0166 , 0.33%
AUD/EUR 0.6363 , 0.0023 , 0.36%
AUD/GBP 0.5540 , 0.0009 , 0.16%
AUD/NZD 1.0723 , -0.0028 , -0.26%
AUD/CAD 0.9545 , 0.0037 , 0.39%

After beginning the session at .7246, the AUD/USD climbed to as high as .7299 in European trade, helped by broad-based weakness in the greenback following the US midterm election result.

“With trade tensions to the fore over recent months and risk currencies in the spotlight, the US midterms were being seen through the prism of whether the outcome might embolden the President to go harder on trade or in effect if the elections would clip his wings,” said David de Garis, Economist at the National Australia Bank.

“With the Democrats gaining control over the House, the latter scenario now might be a little more likely, including from his press conference, though both sides are unsurprisingly claiming victory as they might.”

Along with the prospect of policy gridlock in the US Congress, potentially leading to slower economic growth, speculation over upcoming trade negotiations between the United States and China helped to boost all major currencies against the greenback, especially those that have been beaten up recently such as the Australian and New Zealand dollar’s as well as those in emerging markets.

The offshore traded yuan, or CNH, also strengthened marginally, helping the Aussie to sit near the top of the session leader board nearing the end of trade.

AUD/USD 4-Hour Chart.

The Aussie gained against all major crosses except the New Zealand dollar which ripped higher late on Tuesday following the release of strong jobs data for the September quarter. As expected, the RBNZ left policy settings unchanged at its meeting this morning. It also forecast that interest rates are only likely to increase by the middle of 2020, the same view expressed three months earlier.

Turning to the session ahead, the biggest event will come late in the day with the latest FOMC policy decision from the US Federal Reserve.

“It’ll be still upbeat on the economy, noting the continuing improvement in the labour market with signs that labour cost pressures are beginning to emerge,” de Garis says referring to the expected tone of the accompanying monetary policy statement.

No change in the Fed funds rate is expected, although it’s likely the FOMC will flag another potential increase when it next meets in December.

Before that decision arrives in the early hours of tomorrow morning in Australia, the other event that traders will be keeping an eye upon will be the release of Chinese trade data for October in the second half of Asian session.

From a year earlier, exports and imports are seen increasing by 11% and 14% respectively, down from 14.5% and 14.3% in the 12 months to September.

The trade surplus is expected to lift to $US35 billion, up from $US31.69 billion a month earlier.

Given ongoing trade tensions between the two nations, China’s deficit with the United States could prove to be more influential that the headline trade balance itself.

Outside of that data point, Japan will release a stack of second-tier data that’s unlikely to interest markets.

Later in the session, the main highlights will be German and French trade data for September, Canadian housing starts and jobless claims from the United States.

The ECB will also release its latest economic bulletin while the European Commission will put out new growth forecasts for the region. Draghi and Coeure from the ECB are also scheduled to deliver speeches.