- The Australian dollar bounced on Monday after falling to fresh multi-year lows earlier in the session.
- The move likely reflected short-covering ahead of major economic events in the coming days, as well as modest recovery in the Chinese yuan on Monday.
- It’s a busy domestic economic calendar on Tuesday with two RBA events and the last of Australia’s Q2 GDP inputs released. US markets also return from holidays.
The Australian dollar bounced on Monday after falling to fresh multi-year lows earlier in the session, gaining ground against all of the major crosses.
Here’s the scoreboard as at 7am in Sydney.
AUD/USD 0.7213 , 0.0023 , 0.32%
AUD/JPY 80.14 , 0.25 , 0.31%
AUD/CNH 4.9294 , 0.0062 , 0.13%
AUD/EUR 0.6208 , 0.0006 , 0.10%
AUD/GBP 0.5602 , 0.0058 , 1.05%
AUD/NZD 1.0924 , 0.009 , 0.83%
AUD/CAD 0.9445 , 0.0062 , 0.66%
After opening the day at the lowest level since early January 2017 against the greenback, the AUD/USD fell further in the Asia session, driven down by a weak Australian retail sales report for July.
However, after falling to as low as .7166, the Aussie began to crawl higher, helped in part by a recovery in the Chinese yuan which opened weaker before strengthening in the latter parts of Asian trade.
That, along with thin, holiday-impacted trading volumes and short-covering ahead of major domestic and international events in the days ahead, helped to lift the AUD/USD back above the .7200 cent level in early European trade.
“It is hard to get excited on the Aussie’s near-term fortunes given the imminent risk that President Trump may impose another round of tariffs on Chinese imports,” said Rodrigo Catril, Senior FX Strategist at the National Australia Bank.
“On the domestic front, more out-of-cycle mortgage rate rises adds a domestic element to downside risk to the Aussie via further pushing out expectations for the start of an RBA tightening.”
Adding to the need for caution, Catril said emerging market currencies remained remained under pressure on Monday, a scenario that has, up until this week, usually led to Aussie dollar weakness.
The Aussie also gained against all of the major crosses, particularly the British pound as a combination of Brexit concerns, rumours of leadership spill and soft manufacturing PMI data saw the GBP slide heavily across the board.
A weaker-than-expected terms of trade increase in New Zealand during the June quarter also contributed to further selling in the Kiwi dollar.
Helping to explain why the Aussie dollar performed strongly to start the week, it’s yet another busy domestic calendar on Tuesday, headlined by the RBA’s September interest rate decision at 2.30pm AEST.
While rates won’t move at this meeting, again, given recent softness in local economic data, markets will be looking for any signs the bank is losing confidence that the next move in official rates is likely to be higher.
RBA Governor Philip Lowe will also speak from 7.30pm AEST at the Reserve Bank Board Dinner in Perth.
Before the RBA decision arrives, Australia will receive the last of its Q2 GDP inputs with release of balance of payments, including the contribution to economic growth from trade, along with government spending figures.
Both are chunky parts of the Australian economy and carry the potential to shift expectations for GDP in an instant.
They’ll arrive at 11.30am AEST.
Outside of Australia, the major highlights today include manufacturing PMI and construction spending data from the United States, Eurozone producer price inflation and construction PMI from the UK.
For Kiwi dollar traders, the latest Global Dairy Trade auction will also take place.
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