The Australian dollar jumps to six-week highs

Buda Mendes/Getty ImagesElizabeth Moss of Australia competes in Women’s High Jump Stage 2 during day 9 of Buenos Aires 2018 Youth Olympic Games at Youth Olympic Park Villa Soldati on October 15, 2018 in Buenos Aires, Argentina.
  • The Australian dollar rose strongly across the board on Wednesday.
  • A soft US core inflation report for March, and push back from the RBA on growing expectations about the prospect of a near-term rate cut were the two main factors behind the Aussie’s strength.
  • There’s little on the economic calendar on Thursday, other than Chinese inflation data. Several US FOMC members will be in action.

The Australian dollar rose strongly across the board on Wednesday, helped by the release of a soft US core inflation report for March and reduced odds of a near-term interest rate cut from the Reserve Bank of Australia (RBA).

Here’s where the Aussie is trading at 7am in Sydney on Thursday.

AUD/USD 0.7170 , 0.0048 , 0.67%
AUD/JPY 79.59 , 0.44 , 0.56%
AUD/CNH 4.8167 , 0.0326 , 0.68%
AUD/EUR 0.6360 , 0.0037 , 0.59%
AUD/GBP 0.5476 , 0.0025 , 0.46%
AUD/NZD 1.0594 , 0.0037 , 0.35%
AUD/CAD 0.9552 , 0.0054 , 0.57%

Two main catalysts helped the push the Aussie higher during the session.

The first was a speech from RBA Deputy Governor Guy Debelle who pushed back against growing market expectations that the bank will deliver a near-term cut to Australia’s cash rate.

Debelle’s speech helped the Aussie to bounce from losses earlier in the session, helping to lift the AUD/USD back above the .7150 level in early European trade.

The Aussie was given a further boost by the release of a soft US core consumer price inflation report for March.

Underlying inflation grew by 2% from a year earlier, slightly below the 2.1% pace expected. Headline inflation rose by 1.9% from a year earlier, above the 1.8% level expected, but traders focused on the core reading which largely reflected the impact of higher energy prices.

There was little reaction to the release of the minutes of the US Federal Reserve’s March FOMC meeting with the details largely confirming what markets already knew — the Fed intends to be patient in determining the future direction of policy settings amidst heightened levels of uncertainty.

The AUD/USD rose to as high as .7175 in North American trade before easing fractionally lower towards the close. There no little reaction to Australian Prime Minister calling Australia’s Federal Election for May 18.

It currently trade at the highest level since late February.

Investing.comAUD/USD 4-Hour Chart

Like the greenback, the Aussie also gained against all the major crosses, including the euro which endured a topsy turvy session following the ECB’s April monetary policy decision.

“The EUR slipped a little after ECB President Draghi re-iterated the more downbeat assessment of the Eurozone economy,” said Attrill at the NAB.

Turning to the day ahead, it looks set to be a fairly quiet session for markets with few major events scheduled on the calendar.

There’s nothing on the domestic calendar in Australia with Chinese consumer and producer price inflation figures for March the only regional release that will attract any real attention from traders.

CPI is expected to jump to an annual pace of 2.3%, up from 1.5%, while producer prices look set to lift by 0.4% over the year from 0.1% in February. Much of the strength in CPI is expected to be in food prices, especially those for pork.

Later in the day, other highlights include final CPI reports for March from Germany and France along with weekly jobless claims and producer price inflation in the US.

On the Fed front, FOMC members Clarida, Williams, Bullard, Kashkari and Bowman will all be in action.

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