The Aussie dollar lurches lower as stocks tumble again

  • The Australian dollar is weaker against most of the major crosses in late trade on Monday, giving back gains after jumping to a three-month high on Friday.
  • The reversal in the Aussie was driven by renewed trade tensions between the United States and China and another ugly selloff for US and European stocks.
  • RBA Governor Philip Lowe will speak later in today’s session. Otherwise the economic calendar is looking fairly quiet.

The Australian dollar is weaker against most of the major crosses in late trade on Monday, giving back gains after jumping to a three-month high on Friday.

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

AUD/USD 0.7291 , -0.0043 , -0.59%
AUD/JPY 82.05 , -0.56 , -0.68%
AUD/CNH 5.0529 , -0.0139 , -0.27%
AUD/EUR 0.6366 , -0.0044 , -0.69%
AUD/GBP 0.5672 , -0.003 , -0.53%
AUD/NZD 1.0659 , 0.0023 , 0.22%
AUD/CAD 0.9607 , -0.0034 , -0.35%

After jumping back above the .7300 level on Friday on renewed caution about the outlook for interest rate hikes from the US Federal Reserve, the AUD/USD fell heavily in early trade as renewed trade tensions between the United States and China resurfaced at the latest APEC meeting held in Papua New Guinea over the weekend.

The Aussie meandered its way through Asian and early European trade before losing ground once again as North American markets opened, sliding back below the .7300 level as losses in stocks began to accelerate.

“The ‘FAANG’ sector is again driving the broader market weakness with Apple off another 3.5% on new reports of reductions in orders for three iPhone models, and Facebook off 5% in conjunction with an ongoing purge of social media-related stocks in part on ongoing speculation regulation is coming to the sector,” said Ray Attrill, Head of FX Strategy at the National Australia Bank.

Along with losses in tech stocks, broader sentiment wasn’t helped by an ugly plunge in US home builder sentiment in November, casting renewed doubt over the outlook for the US economy.

“The US NAHB survey plunged by 8 point to 60, its biggest drop in four years and lowest since August 2016,” Attrill said.

The weak report weighed upon the greenback, along with further cautious remarks from another leading US Federal Reserve official, John Williams of the New York Fed.

“We’ll be likely raising interest rates somewhat but it’s really in the context of a very strong economy,” Williams said at an event in New York.

“We’re not on a pre-set course. We’ll adjust how we do monetary policy to do our best to keep this economy going strong with low inflation.”

Following similarly cautious remarks from Fed Chair Jerome Powell and Vice Fed Chair Richard Clarida late last week, the remarks saw the US dollar index lose further ground, largely reflecting renewed strength in the euro, UK pound and Japanese yen.

However, the buying enthusiasm there did not extend to the AUD/USD which sits at .7291 with a hour left to trade.

AUD/USD Hourly Chart

Turning to the session ahead, there’s little in the way of market moving data or events to whet the appetite of traders, leaving other factors such as sentiment, positioning and technicals to dictate broader direction.

The Reserve Bank of Australia (RBA) will releases the minutes of its November board meeting at 11.30am AEDT, an event that is unlikely to offer few surprises given markets have heard a lot from the RBA in recent weeks.

“[The] RBA Minutes will be a low key affair given the Bank already published its updated forecasts in the quarterly Statement on Monetary Policy earlier this month,” says Richard Grace, Chief Currency Strategist and Head of International Economics at the Commonwealth Bank.

“The Minutes will reiterate the RBA’s upbeat assessment of the labour market. More importantly for markets, the bank should remain comfortable on housing with their growth forecasts implying no negative spill over effect to the broader economy, for now at least.”

As opposed to the RBA minutes, there’s likely to be far more interest on a speech from RBA Governor Philip Lowe on “Trust and Prosperity” that will be delivered at 7.20pm AEDT.

Outside of Australia, the other highlights today include French unemployment, German producer prices along with building permits and housing starts from the United States.

Given the plunge in home builder confidence in the NAHB survey, the latter clearly carries the potential to create short-term volatility in markets.

Mark Carney of the Bank of England will also speak while the latest GDT dairy auction will be of interest to New Zealand dollar traders.