The Australian dollar has steadied but it won't remain that way for long

  • The Australian dollar is trading slightly higher against most major crosses in early Asian trade on Monday.
  • The modest gains follow the release of a reasonable services PMI report from China over the weekend.
  • Chinese markets will be closed this week for Lunar New Year holidays.
  • There’s plenty on the economic calendar on Monday, both at home and abroad. However, most of the major market releases will arrive in the days ahead.

The Australian dollar came under modest selling pressure on Friday, although it retained most of the strong gains achieved earlier in the week.

However, the release of a reasonable China services PMI report over the weekend has seen the Aussie push higher against most of the major crosses in early trade on Monday.

Here’s the scoreboard at 8.15am in Sydney.

AUD/USD 0.7245 , -0.0004 , -0.06%
AUD/JPY 79.33 , 0.04 , 0.05%
AUD/CNH 4.8947 , 0.002 , 0.04%
AUD/EUR 0.6326 , 0.0004 , 0.06%
AUD/GBP 0.5541 , 0.0008 , 0.14%
AUD/NZD 1.0506 , 0.0027 , 0.26%
AUD/CAD 0.9489 , -0.0006 , -0.06%

The resilience in the Aussie on Friday came despite the release of a weak China manufacturing PMI report for January, ensuring concerns over the health of China’s industrial sectors remained elevated ahead of Lunar New Year holidays.

The Aussie also showed little reaction to the release of a string of strong US economic data releases on Friday, including a huge 300,000-plus increase in non-farm payrolls in January.

“The headline non-farm payrolls number printed at 304,000, almost double the 165,000 street consensus, though December was revised down by a hefty 90,000 to 222,000,” said Ray Attrill, Head of FX Strategy at the National Australia Bank.

The downward revision to payrolls growth in December, along with a slight undershoot in hourly wages growth in January and uptick in the unemployment rate to 4% that reflected both higher labour force participation and the likely impact of the partial US government shutdown, was one factor that ensured the Aussie was not pressured by the release.

Not even separate data showing a big improvement in US service sector activity last month was enough to prompt widespread selling in the Aussie which showed scant reaction to a surge in US bond yields following the ISM report.

In the end, the AUD/USD closed the week at .7249, a level where it continues to trade in early Asian trade today.

Investing.comAUD/USD Hourly Chart

Turning to the day ahead, it looks to be a quiet one for traders with most major market events arriving later in the week.

Chinese markets will also be closed for Lunar New Year holidays until next week, potentially keeping headline risk and liquidity levels lower than what would usually be the case.

On the data calendar, Australian building approvals for December will be released at 11.30am AEDT. A small increase is expected after a large 9% fall in November. ANZ will also release its monthly Australian job ads series at the same time as the building approvals report.

The Melbourne Institute Australian inflation gauge for January will also arrive at 11am AEDT.

The final report for Australia’s Banking Royal Commission will also be released at 4.10pm AEDT. While it will naturally garner plenty of attention, unless the recommendations will have a meaningful influence on Australian economic growth one way or another, the reaction from currency markets will likely be limited.

Outside of Australia, the other data highlights today include Eurozone producer price inflation and investor sentiment, UK construction PMI, Italian CPI along with Empire State Manufacturing Index and factory orders from the United States.

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