- The Australian dollar remains range-bound and choppy.
- Optimism over trade negotiations between China and the US was offset by concern of a potential US government shutdown on Tuesday, keeping the AUD/USD in a tight range.
- US CPI will be released today. In Australia, the main highlight comes from the latest Westpac-MI consumer sentiment report for December.
The Australian dollar remains stuck in a familiar range against the greenback, continuing to move in lockstep with the broader mood of markets.
Here’s the scoreboard at 8.05am in Sydney on Wednesday.
AUD/USD 0.7201 , 0.0012 , 0.17%
AUD/JPY 81.65 , 0.19 , 0.23%
AUD/CNH 4.9703 , 0.0011 , 0.02%
AUD/EUR 0.6360 , 0.0033 , 0.52%
AUD/GBP 0.5767 , 0.0046 , 0.80%
AUD/NZD 1.0471 , 0.0011 , 0.11%
AUD/CAD 0.9644 , 0.0012 , 0.12%
Having opened at .7189, the AUD/USD drifted higher in Asian trade, largely ignoring a deterioration in Australian business confidence during November.
News that Chinese new bank lending and total social financing topped market expectations in November — raising hopes for increased infrastructure spending in the months ahead — saw the AUD/USD hit a session high of .7224 in European trade.
A tweet from Donald Trump on his current assessment of trade negotiations with China also helped to support sentiment midway through the session.
Very productive conversations going on with China! Watch for some important announcements!
— Donald J. Trump (@realDonaldTrump) December 11, 2018
The “important announcement” ended up being reports that China is considering reducing tariffs on US auto imports from 40% to 15%, in line with levels applied to other nations.
However, as seen in this separate tweet from Trump earlier in the month, this was not exactly “new” news.
China has agreed to reduce and remove tariffs on cars coming into China from the U.S. Currently the tariff is 40%.
— Donald J. Trump (@realDonaldTrump) December 3, 2018
Tariffs on US auto imports were only recently increased as the trade spat between the two escalated.
Chinese Ministry of Commerce also helped to appease investor nerves, stating that US Treasury Secretary Mnuchin and Chinese Vice Premier He will “push forward with next steps in a timetable and roadmap” in relation to trade negotiations.
That helped to push commodity prices higher, led by copper and crude oil.
However, those positive vibes were reversed during the North American session, sparked by remarks from Donald Trump that he would be “proud” to shut down the government over border security differences with Democrats.
“If a government shutdown is to be avoided, a spending bill needs to be passed by December 21st, so both parties have plenty of time for a few shouting matches, before a deal is reached,” said Rodrigo Catril, Senior FX Strategist at the National Australia Bank.
Trump’s remarks saw US stocks give up earlier gains, dragging the Aussie dollar lower as a consequence. However, like stocks, the Aussie rebounded towards the close.
The Aussie also gained ground against all of the major crosses, especially the euro and British pound that were once again undermined by ongoing Brexit uncertainty.
Turning to the day ahead, sentiment and headlines look set to dictate market movements despite the release of second-tier data in Asia.
Locally, the latest Westpac-MI consumer sentiment report for December will be released at 10.30am AEDT. Japanese machine orders for October will also be on tap.
Later in the session, the undisputed data highlight will be the release of US consumer price inflation for November at 12.30am AEDT.
“Our core model of CPI is suggestive of an on-consensus 0.2% month-on-month and 2.2% year-on-year result, but risks around this print are probably to the downside given anecdotes of retailers bringing forward Christmas sales early, as well as continued liquidation sales from the closure of a number of department stores,” Catril says.
Before the CPI report arrives, markets will also receive eurozone industrial production figures for October.