- The Australian dollar continued to slide on Monday, coming within a whisker of falling to a fresh one-year low against the greenback.
- Ongoing trade tensions between the Unite States and China, along with divergent monetary policy outlooks from major central banks, were cited as the main catalysts behind the Aussie’s weakness.
- Australian Q1 house price data will be released today, as will the minutes of the Reserve Bank of Australia’s June monetary policy meeting. Several ECB members will also speak in the latter pasts of the session.
The Australian dollar continued to slide on Monday, coming within a whisker of falling to a fresh one-year low against the greenback.
Here’s the scoreboard as at 7am in Sydney.
AUD/USD 0.7422 , -0.0018 , -0.24%
AUD/JPY 82.04 , -0.30 , -0.36%
AUD/CNH 4.7902 , 0.0024 , 0.05%
AUD/EUR 0.6385 , -0.0024 , -0.37%
AUD/GBP 0.5602 , 0.0001 , 0.02%
AUD/NZD 1.0699 , -0.0009 , -0.08%
AUD/CAD 0.9793 , -0.002 , -0.20%
As was the case late last week, trade tensions between the United States and China, along with divergent monetary policy settings between the US Fed and other major central banks, remained the dominant theme on Monday, seeing the AUD/USD fall to as low as .7111, just above the low of .7410 set in early May.
“There was no important economic data releases, and market activity centred on consolidation of last week’s moves driven by the central bank communication from the Fed and ECB,” said Richard Grace, Chief Currency Strategist at the Commonwealth Bank.
“Friday’s announcement that the US will impose an additional duty of 25% on $US50 billion worth of Chinese imports, and China’s response of equal retaliatory imports is still being digested by market participants.
“The economic impacts are small, but it is the uncertainty of an escalation in trade wars that market participants don’t like. It risks slowing global investment, which is depreciating for AUD, CAD and NZD.”
As seen in the daily chart below, the AUD/USD has been under the pump in recent weeks, losing 3.4% over the past nine trading sessions.
The Aussie also lost ground against the euro and yen, reflecting the risk-off tone seen during the session.
The euro was initially under pressure due to renewed political uncertainty over German immigration policy, although it managed to cut losses in the latter part of the session.
The Aussie also fell against other commodity currencies such as the New Zealand and Canadian dollar, the latter supported by a renewed burst of buying in crude oil futures ahead of OPEC’s meeting later in the week.
Turning to the day ahead, there’s a smattering of data and policy releases scheduled in Australia, although none appears likely to move the Aussie by a significant margin.
Weekly consumer confidence figures will be released by ANZ at 9.30am. That will be followed by March quarter house price data from the ABS at 11.30am AEST.
The RBA will also release the minutes of its June monetary policy meeting at 11.30am AEST. While they carry the potential to surprise, it’s clear that the RBA is on hold until it is confident that stronger economic growth will lead to lower unemployment and a gradual increase in wage and inflationary pressures.
That point appears a long way off at present.
“We will also be interested in the RBA’s assessment of the global outlook given that growth has slowed in the UK, Europe and Japan,” Grace says.
“Australian Q1 house price data is also released today, with the recent trend and empirical evidence suggesting prices may fall more than the 1.0% level expected by markets.
“Hence, there are intra day downside risk for AUD/USD today, and it may test the 9 May low.”
Later in the session, data highlights include current account figures from the Eurozone along with housing starts and building permits from the United States.
The latest GDT dairy auction will also be held, an event that usually leads to some volatility in the New Zealand dollar.
Given the quiet data calendar, central bank speeches at the ECB’s central bank forum in Sintra, Portugal, may dominate the second half of the session with ECB members Draghi, Praet and Lane all in action. James Bullard of the US Fed will also take to the lectern.
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