The Australian dollar continues to rally

Christian Petersen/Getty Images
  • The Australian dollar continued to rally on Monday, extending the move from late last week.
  • The main theme for the session was US dollar weakness. The DXY hit the lowest level since late October.
  • Trade talks between China and the US continue in Beijing today. There’s also plenty on the economic data calendar, including in Australia.

The Australian dollar rose against most of the major crosses on Monday, adding to the strong gains seen late last week.

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

AUD/USD 0.7144 , 0.0032 , 0.45%
AUD/JPY 77.66 , 0.51 , 0.66%
AUD/CNH 4.8902 , 0.0121 , 0.25%
AUD/EUR 0.6225 , -0.0012 , -0.19%
AUD/GBP 0.5594 , 0.0012 , 0.21%
AUD/NZD 1.0576 , 0.0027 , 0.26%
AUD/CAD 0.9499 , -0.002 , -0.21%

Rather than being driven by Australian dollar strength, Ray Attrill, Head of FX Strategy at the National Australia Bank, said the dominant theme during the session was broad-based US dollar weakness.

“[The US dollar index} just recorded its lowest levels since 22nd October 2018. This is over 2% down on its mid-December highs,” Attrill said.

“Even if the US rates market is getting ahead of itself pricing in the commencement of a Fed easing cycle as early as late 2019, it is going to take lot to get the US dollar index back near its 2018 range highs. We don’t expect it.”

Along with reduced safe-haven demand during the session, the greenback was not helped by news that the giant US services sector grew at the slowest pace in five months in December, according to the latest ISM non-manufacturing PMI.

The weakness in the greenback allowed the AUD/USD to climb to .7150 in early North American trade, leaving it at the highest level since December 19.

Investing.comAUD/USD Hourly Chart

The Aussie also rallied against the Japanese yen, reflective of the risk-on tone seen on Monday. Modest gains were also recorded against the New Zealand dollar, Chinese yuan and British pound.

In contrast, most European currencies outperformed the Aussie on Monday. The Canadian dollar was also supported by continued gains in crude oil prices.

Turning to the day ahead, sentiment and headlines towards US-Sino trade negotiations will likely dictate broader market movements once again. If the performance on Monday was any indication, movements in the Japanese yen and Chinese yuan may prove to be influential on the Australian dollar today. During Asian trade yesterday, where they moved, the Aussie followed.

While it will once again play second-fiddle to trade-related news, plenty of economic data will be released during today’s session, both domestically and abroad.

In Australia, the main highlight comes from trade figures for November that will be released at 11.30am AEDT. Markets are looking for a surplus of $2.175 billion, down marginally from $2.316 billion in October.

ANZ will also release its monthly job ads survey alongside the trade report.

Elsewhere, the other highlights on Tuesday include German industrial production, Eurozone consumer confidence, Canadian trade along with NFIB Small Business optimism, consumer credit, JOLT job openings and trade data from the United States.

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