- The Australian dollar tried to rally on Tuesday but failed again.
- Risk appetite soured as trade tensions between the US and EU while the IMF downgraded its global growth forecasts for the third time in six months.
- The events calendar perks up on Wednesday with several key central bank releases. Domestically, a speech from RBA Deputy Governor Guy Debelle could prove to be influential on the Aussie.
The Australian dollar remains stuck in a narrow trading range, failing once again to hold onto earlier gains on Tuesday as risk appetite in markets soured.
Here’s the scoreboard at 7am in Sydney on Wednesday.
AUD/USD 0.7125 , -0.0001 , -0.01%
AUD/JPY 79.19 , -0.24 , -0.30%
AUD/CNH 4.7864 , -0.0001 , 0.00%
AUD/EUR 0.6324 , -0.0003 , -0.05%
AUD/GBP 0.5459 , 0.0006 , 0.11%
AUD/NZD 1.0562 , -0.0008 , -0.08%
AUD/CAD 0.9497 , 0.001 , 0.11%
After starting the session at .7126, the AUD/USD climbed to as high as .7152 in European trade, helped in part by a slightly stronger-than-expected increase in Australian housing finance in February.
However, as has often been the case recently, it couldn’t sustain the move, falling in the latter parts of the session as concerns about the global economy resurfaced.
Trade tensions — this time between the United States and European Union — was one factor cited to explain the Aussie’s reversal. Another downgrade to global growth from the IMF may, at the margin, have further dented sentiment despite already being largely priced in by markets several months ago.
News that US job openings fell sharply in February may have also contributed to the downbeat mood, raising fresh questions about the resilience of the US economy.
“The positive vibes from US-China trade negotiations, coupled with better than expected China and Australian data releases, have played into a stronger AUD of late,” said Rodrigo Catril, Senior FX Strategist at the National Australia Bank. “However, the Aussie is a risk sensitive currency, and given the number of risk events over the next 24 hours it seem reasonable for the pair to trade with a cautious tone.”
As noted by Catril, there’s a bit more on the economic calendar today, at least compared to previous sessions.
Locally, the Westpac-MI Consumer Sentiment report for April will be released at 10.30am AEST.
That will be followed at 1.40pm by a speech from RBA Deputy Governor Guy Debelle entitled “The State of the Economy”. Following an adoption of a neutral policy bias by the bank in February, and tweak in it’s April policy statement that many believe indicates the RBA may be moving closer to cutting Australia’s cash rate again, Debelle’s speech carries the potential to elicit a meaningful reaction in the Aussie dollar today.
“We think the speech could prove important given the RBA tweaked the policy paragraph of its interest rate decision early in April, which was the first change in years,” Catril said.
“We think Debelle has plenty of ammunition to signal a new round of RBA easing.”
Outside of Australia, there’s a swathe of second-tier economic released in Japan while Bank of Japan Governor Kuroda is also scheduled to speak.
Later in the session, other data highlights include monthly GDP and industrial production figures from the UK along with CPI, monthly budget figures and crude oil inventory data in the United States.
While there are some meaningful data releases on the way, central banks will likely dictate the broader direction of markets in the second half of the session with the ECB announcing its April monetary policy decision while the minutes of the US Federal Reserve’s FOMC March policy meeting will also released.
“A policy change announcement seems unlikely, but amid recent soft data releases it is hard not to expect anything but a dovish tone from ECB President Mario Draghi at the post meeting press conference,” Catril said, referring to the ECB decision.
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