The Australian dollar is treading water as traders eye bigger events ahead

  • The Australian dollar put in a mixed performance to start the week, gaining against the greenback but trading mixed against the major crosses.
  • The British pound and euro were the top performers for the session, helped by optimism over Brexit and Italian budget negotiations.
  • The RBA will announce its November interest rate decision today. The results from US midterm elections are likely to be known by late-morning in Australia on Wednesday.

The Australian dollar put in a mixed performance to start the week, lifting modestly against the greenback but trading mixed against the major crosses.

Here’s the scoreboard at 8am in Sydney on Tuesday.

AUD/USD 0.7214 , 0.0017 , 0.24%
AUD/JPY 81.64 , 0.16 , 0.20%
AUD/CNH 4.9850 , 0.0198 , 0.38%
AUD/EUR 0.6323 , -0.0036 , -0.57%
AUD/GBP 0.5531 , -0.0034 , -0.61%
AUD/NZD 1.0811 , -0.0015 , -0.14%
AUD/CAD 0.9448 , 0.0020 , 0.21%

After opening at .7197, the AUD/USD ground higher against the greenback throughout the session, helped by tweaks to positioning ahead of US midterm elections on Tuesday and the Federal Reserve’s November interest rate decision on Wednesday.

At the margin, strong gains in US stocks, excluding the Nasdaq, as well as strength in emerging market currencies, likely encouraged modest buying in the Aussie, helping to offset weakness in the Chinese yuan seen earlier in the session.

Another strong US services PMI report for October from the ISM was largely overlooked by traders.

With a hour left to trade, the AUD/USD is sitting at .7214, up 0.24%.

AUD/USD Hourly Chart

While the Aussie edged higher against the greenback, it fell sharply against the British pound and euro.

“GBP has been the big mover in G10, following mixed Brexit reports,” said Rodrigo Catril, Senior FX Strategist at the National Australia Bank.

“Yesterday GBP went bid at the open after a the Sunday Times reported that UK Prime Minister Teresa May had secured private concessions from Brussels that will allow her to keep the whole of Britain in a customs union, avoiding a hard border in Northern Ireland.

“However, the positive vibe didn’t last long as the Telegraph dismissed that report and added that UK Brexit Secretary Raab had privately demanded the right to pull Britain out of EU’s Irish backstop after just three months.”

Despite the mixed reports on Brexit negotiations, the GBP held onto much of its earlier gains, leading the broader charge higher against the greenback despite the release of soft services PMI data for October.

The euro was also in demand due to improved optimism over budget negotiations between the European Commission and Italy, along with adjustments to market positioning with bigger events ahead.

Turning to the day ahead, the major event domestically will be the release of the Reserve Bank of Australia’s (RBA) November interest rate decision at 2.30pm AEDT.

The cash rate will be left unchanged at 1.5%. However, ahead of updated forecasts from the RBA later in the week, there’ll be plenty of interest on the accompanying monetary policy statement. This 10-second guide has more on what to expect.

There’s little in the way of top-tier economic data released in Asia today, an outcome that will leave headlines, technicals and adjustments to market positioning to dictate the broader direction.

As ever, the performance of Chinese markets, especially the yuan, will likely prove to be influential on the Aussie dollar.

Later in the session, highlights include services PMIs from Europe, German factory orders, Eurozone producer price inflation, Canadian building permits along with JOLTS job openings from the United States.

Results of the US midterm elections are unlikely to be known until late morning on Australia’s east coast on Wednesday.