- The Australian dollar was belted again on Tuesday, falling to a fresh multi-year low against the greenback.
- Broad-based US dollar strength — fuelled by safe haven buying and strong economic data — did the damage.
- The economic calendar is busy on Wednesday both at home and abroad. The headline act domestically will be Australia’s Q2 GDP report.
The Australian dollar was hammered again on Tuesday, tumbling to a fresh multi-year against the greenback.
It also lost ground against most of the major crosses, continuing the downdraft that’s now been underway for over six months.
Here’s the scoreboard as at 7am in Sydney.
AUD/USD 0.7175 , -0.0036 , -0.50%
AUD/JPY 80.01 , -0.08 , -0.10%
AUD/CNH 4.9138 , -0.0142 , -0.29%
AUD/EUR 0.6193 , -0.001 , -0.16%
AUD/GBP 0.5581 , -0.002 , -0.36%
AUD/NZD 1.0946 , 0.0025 , 0.23%
AUD/CAD 0.9465 , 0.002 , 0.21%
After opening trade above the 72 cent level, the AUD/USD fell steadily in Asian trade, moving back towards the lows struck on Monday.
While the RBA’s September interest rate decision provided it with a boost — the bank sounded more optimistic than in August and appeared relaxed about the Aussie’s recent falls — the move proved to be fleeting with currency tumbling in early European trade as the US dollar surged higher.
“[The] US dollar rallied across the board following a very strong US ISM manufacturing survey for August,” said Joseph Capurso, Senior Currency Strategist at the Commonwealth Bank.
The index hit a 14-year high, powered by a surge in new orders.
Continued declines in emerging market currencies also helped to spur safe-haven buying in the greenback, as did concerns that $US200 billion worth of additional tariffs on Chinese imports to the United States could be introduced as soon as Friday.
The strength in the greenback weighed on not only the Aussie but broader currency and commodity markets — the double-whammy ensuring the Aussie was among the worst performers for the session.
“The stronger US dollar weighed on the Aussie, though most of the weakness reflected an unwinding of the short squeeze following the release of the RBA’s ‘neutral’statement,”
“Some market participants expected a ‘dovish’ tilt in the RBA statement that was not delivered.”
The AUD/USD fell to as low as .7160 — a level not seen since early January 2017 — before recovering into the close thanks primarily to a rebound in US stocks.
Turning to the day ahead, the movements in the Aussie look set to be dictated by broader risk sentiment despite the release of major data releases both domestically and abroad.
Locally, Australia’s Q2 GDP report will be released. Economists are looking for a quarterly increase of 0.7%, leaving the change on a year earlier at 2.8%.
This release has moved the Aussie in the past although, given risk sentiment is currently dominating market movements, it will likely have to surprise significantly to the upside or downside for it to have a lasting impact.
This 10-second guide has more on what to expect.
Before that release arrives, markets will also receive services PMI data from the Ai Group at 8.30am AEST.
Regionally, a plethora of services PMI reports will arrive, headline by those from China and Japan.
PMI reports will also dominated the European calendar with figures from the Eurozone and UK the ones to watch. Other data highlights on Wednesday include Eurozone retail sales along with trade figures from the United States and Canada.
The Bank of Canada will also announce its September interest rate decision. No change in rates is expected. There’s also a number of central bank speakers scheduled, headlined by John Williams of the New York Fed.
Business Insider Emails & Alerts
Site highlights each day to your inbox.