The Australian dollar continues its slow grind higher

Alex Livesey/Getty Images1402237P 1998 TOUR DE FRANCE
  • The Australian dollar continued to push higher on Monday, briefly hitting a two-week high against the greenback before trimming gains into the close.
  • There was little reaction to mixed US economic data or news that the US government deficit ballooned to the highest level since 2012 in the 2018 fiscal year.
  • The economic calendar is busy today with major releases scheduled domestically and abroad. Italian fiscal concerns could reemerge as the nation submits its figures to the European Commission.

The Australian dollar continued to push higher on Monday, briefly hitting a two-week high against the greenback before trimming gains into the close.

Here’s the scoreboard at 8am in Sydney.

AUD/USD 0.7131 , 0.0014 , 0.20%
AUD/JPY 79.69 , -0.17 , -0.21%
AUD/CNH 4.9364 , 0.0104 , 0.21%
AUD/EUR 0.6157 , 0.0003 , 0.05%
AUD/GBP 0.5422 , 0 , 0.00%
AUD/NZD 1.0879 , -0.0056 , -0.51%
AUD/CAD 0.9265 , 0.0003 , 0.03%

After sliding briefly below the .7100 level in Asian trade as losses in stocks accelerated across the region, the AUD/USD staged a recovery in European trade, rising to .7148, the highest level since October 3.

There was no distinct catalyst to explain the move, although it did correspond with a rebound in European stocks which rallied after trading in the red in the early parts of the session.

One suspects that stretched short speculative positioning, and an absence of any new negative news, may have prompted some short covering from traders. One look at the performance of the New Zealand dollar — the top performing G10 currency for the session — only adds to the view that the Aussie’s move may have been driven by a rethink of previously-placed bearish bets.

Despite the release of mixed US data during the session, the AUD/USD couldn’t sustain its push higher, pulling back modestly to close the day at .7130.

Investing.comAUD/USD Daily Chart

US retail sales underwhelmed market expectations in September, lifting by just 0.1% compared to forecasts for a gain of 0.6%. The data was likely impacted by Hurricane Florence with spending in food service establishments sliding 1.8% during the month.

Adding to evidence the sales slowdown may have been driven by temporary factors, spending in the retail control group — that which feeds into household consumption in US GDP — rose by a significantly faster 0.5% over the month.

US business inventories also grew by 0.5% following a 0.7% increase in August.

The net effect of the data releases saw the Atlanta Fed’s GDPNow forecast model trim its expectations for economic growth in the September quarter to a seasonally adjusted annual rate of 4%, down from prior estimates of 4.2%.

A downgrade, but still a fast clip nonetheless.

The US dollar also showed little reaction to news that the US government deficit ballooned to $779 billion in the 2018 fiscal year, the largest in six years.

US bond yields were also little changed on the news.

Turning to the session ahead, there’s a plethora of major data releases scheduled both in Asia and abroad.

In Australia, the main highlight will come from the release of the minutes of the Reserve Bank of Australia’s (RBA) October monetary policy meeting at 11.30am AEDT. There was little market reaction to the monetary policy statement released two weeks ago, so a similar outcome could well be seen today.

Markets will be paying attention to the bank’s commentary on current lending conditions, as well as updated views on the housing market.

Regionally, New Zealand Q3 CPI will be released at 8.45am AEDT. A quarterly increase of 0.7% is expected, above the 0.4% lift forecast by the RBNZ in its latest forecasts.

Elsewhere, Chinese CPI and PPI data for September will arrive at 12.30pm AEDT. These releases have lost their market-moving clout in recent years. Chinese monetary growth data for September, including new bank loans and total social financing, could also arrive at any point this week.

Later in the session, highlights include German import prices and ZEW investor confidence, UK unemployment, Eurozone trade data along with industrial production, JOLTS job openings and NAHB home builder sentiment from the United States.

On the political front, all European governments – including Italy – will submit their budget figures for the years ahead to the European Commission ahead of a two-day European Union Summit beginning on Wednesday.

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