- The Australian dollar struggled again on Thursday, losing ground against most of the major crosses.
- The greenback was also under pressure, weighed down by concerns about a potential US government shutdown and a surprise increase in interest rates from Sweden’s Riksbank which helped to lift European currencies.
- The economic data calendar is chock-full of major events today. Most arrive in Europe and North America.
The Australian dollar remained pressured on Thursday, continuing to lose ground against most of the major crosses.
Here’s the scoreboard at 8am in Sydney on Friday.
AUD/USD 0.7114 , 0.0007 , 0.10%
AUD/JPY 79.15 , -0.78 , -0.98%
AUD/CNH 4.9025 , -0.0043 , -0.09%
AUD/EUR 0.6211 , -0.0035 , -0.56%
AUD/GBP 0.5619 , -0.0016 , -0.28%
AUD/NZD 1.0494 , -0.0007 , -0.07%
AUD/CAD 0.9599 , 0.0016 , 0.17%
After opening the session at .7107, the AUD/USD came under renewed selling pressure as Chinese markets reopened, largely mirroring movement in the Chinese yuan which briefly fell to the lowest level since December 11 against the greenback.
Markets largely ignored a mixed Australian jobs report for November, choosing instead to focus on offshore factors.
After bottoming at .7087, the AUD/USD climbed in European trade, hitting a session high of .7148 before following the now familiar pattern of losing ground during the North American session.
Despite further steep declines in global stocks and crude oil futures, the Aussie still managed to eke out modest gains against the greenback, sitting at .7114 with an hour left to trade.
The weakness in the greenback really kicked into gear following a surprise decision from Sweden’s Riskbank to lift policy interest rates.
“Emphasising the importance of yields, the Swedish krona [was the top performer for the session] after the Riksbank told a bold step and lifted rates for the first time in seven years, from -0.50% to -0.25%,” said David de Garis, Economist at the National Australia Bank.
“While most analysts expected rates to remain on hold, a sizeable proportion looked for a hike, so it was not a total surprise.”
Soggy US manufacturing data from the Philadelphia Fed also did little to help the greenback’s cause. Concerns about a potential partial US government shutdown beginning this weekend may have been another factor.
“Congress and the Administration remain in a stand-off over funding for the Wall, Congress not giving the President money for that funding, unhelpful for market sentiment,” de Garis said.
A deal needs to be signed off by midnight tonight in Washington DC in order to prevent parts of the government shutting down.
While the Aussie managed to lift against the greenback, it fell heavily against most of the major crosses, especially the Japanese yen where it shed more than 1%. That reflected increased risk aversion seen during the session, prompting traders to seek the safety of the yen.
The surge in the Swedish krona also appeared to help European currencies with the Euro and British pound both outperforming during the session, the latter despite renewed caution from the Bank of England following its December MPC. The bank, as expected, kept its key bank rate steady at 0.75%.
Despite a big miss in New Zealand Q3 GDP growth, the Aussie also eased lower against the Kiwi. It did manage to crawl higher against the Canadian dollar which was weighed down by another big fall in crude prices.
Turning to the day ahead, the main highlights are Japanese CPI, Eurozone consumer confidence, French GDP, UK GDP, Canadian retail sales and GDP along with durable goods orders, GDP, consumer sentiment and personal income and consumption data from the United States, including the release of the core PCE deflator, the Fed’s preferred inflation measure.
The Bank of England will release its Q4 Bulletin while China’s Central Economic Work Conference (CEWC) will also conclude. In regard to the latter, look out for any headlines relating to growth targets or reforms in the year ahead.
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