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- The Australian dollar remains under pressure, falling to the lowest level since early January on Monday against the greenback.
- The US dollar index (DXY) has now rallied for nine consecutive sessions, leaving it at the highest level this year.
- The British pound was whacked on Monday, undermined by weak economic growth and further Brexit uncertainty.
- Australian business confidence and home loan lending data will be released today. Both could move the Aussie.
The Australian dollar came under renewed selling pressure on Monday, undermined by broad-based US dollar strength.
However, it performed better against the crosses, particularly the British pound.
Here’s the scoreboard at 8.15am in Sydney on Tuesday.
AUD/USD 0.7062 , -0.0026 , -0.37%
AUD/JPY 77.94 , 0.19 , 0.24%
AUD/CNH 4.8003 , -0.0077 , -0.16%
AUD/EUR 0.6263 , 0.0007 , 0.11%
AUD/GBP 0.5491 , 0.0018 , 0.33%
AUD/NZD 1.0481 , -0.0018 , -0.17%
AUD/CAD 0.9395 , -0.0014 , -0.15%
Once again the prevailing theme of the session was US dollar strength. It rallied against all other G10 currencies, helping the US dollar index (DXY) climb to the highest level this year.
The DXY has now rallied for nine consecutive sessions.
“The outstanding feature of financial markets has been further gains for the US dollar, now sitting at its strongest level of 2019 in DXY terms, albeit still comfortably inside the range that has held since mid-2018,” says Ray Attrill, Head of FX Strategy at the National Australia Bank.
“This is largely by default, USD again looking like the cleanest dirty shirt in the laundry.”
The British pound was the biggest loser for the session, weighed down by weak economic growth and a lack of clarity on Brexit negotiations.
The euro, the largest component in the DXY, was also under pressure on renewed concerns over political instability in Spain.
A lift in US bond yields ensured the greenback performed strongly against all of the other major crosses, including the Aussie dollar which fell to the lowest level since early January this year.
Turning to the day ahead, it will be an important one for traders with several notable economic releases scheduled in Australia.
The National Australia Bank’s latest update on Australian business confidence and conditions in January will be released at 11.30am AEDT.
In December, conditions fell by the most since the GFC, leaving overall conditions at levels not seen in several years.
The RBA will be paying close attention to the release, warning in its quarterly statement on monetary policy (SoMP) last week that the sharp slump in conditions seen in December, if sustained, would imply a weaker outcome for “both investment and employment growth” than its current forecasts foresee.
Of note, Roy Morgan Research’s separate Australian business confidence index plunged to multi-year lows in January.
Arriving alongside the NAB report, the ABS will also release Australian home loan lending data for December at 11.30am AEDT.
Markets are looking for owner-occupier home loans to decrease by 2.8% following a 0.9% decline in November.
Outside of the domestic data dump midway through the Asian session, the economic calendar elsewhere is relatively quiet, a scenario that could see the Chinese yuan play a more prominent role in dictating movements in the Aussie dollar in the second half of Asian trade.
On the data front, JOLTS job openings and NFIB Small Business Optimism from the United States are the headline acts.
On the central bank front, Fed Chairman Jerome Powell, BoE Governor Mark Carney and Bundesbank President Jens Weidmann will also deliver speeches.
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