The Australian dollar remains pressured despite an improvement in investor sentiment

  • The Australian dollar traded mixed on Monday, failing to benefit from an improvement in investor sentiment and gains across most commodity markets during the session.
  • The US and Canada stuck a last-minute deal on trade, helping to boost European and US stocks as well as the greenback, Mexican peso and Canadian dollar.
  • The RBA will announce its October interest rate decision at 2.30pm AEST. No change in the cash rate is expected. Nor are any major changes expected in the post-meeting statement. Chinese markets will remain closed for National Day holidays.

The Australian dollar traded mixed on Monday, failing to benefit from an improvement in investor sentiment and gains across most commodity markets during the session.

Here’s the scoreboard as at 7am in Sydney.

AUD/USD 0.7223 , -0.0005 , -0.07%
AUD/JPY 82.33 , 0.15 , 0.18%
AUD/CNH 4.9752 , 0.0052 , 0.10%
AUD/EUR 0.6238 , 0.001 , 0.16%
AUD/GBP 0.5538 , -0.0008 , -0.14%
AUD/NZD 1.0916 , -0.0002 , -0.02%
AUD/CAD 0.9257 , -0.0063 , -0.68%

As the scoreboard reveals, the Aussie had a quiet session, partially reflecting that Chinese markets are now offline for the remainder of the week.

Most of the action was seen against the crosses, particularly the Canadian dollar as the US and Canada stuck a last-minute trade deal.

“The standout in the past 24 hours has been the Canadian dollar that began appreciating as Canada and the US working towards stitching up a revised NAFTA and then a little further with the announcement that a deal was done in a tripartite arrangement with Mexico,” said David de Garis, Economist at the National Australia Bank. “For Canada it avoids auto tariffs but has apparently given some ground on US access to its dairy markets.”

The trade breakthrough helped to boost European and US stocks, as well as the greenback, Mexican peso and CAD.

However, despite some big gains in crude oil and metallurgical coal prices during the session, it was not enough to lift the AUD/USD which traded in a thin range throughout the day.

The Aussie did find some support against the euro, helped by continued concern over Italy’s fiscal situation.

Investing.comAUD/USD Hourly Chart

Turning to the day ahead, the main area of focus for Aussie dollar traders will be the release of the Reserve Bank of Australia’s October interest rate decision at 2.30pm AEST.

There’s next to no chance that the cash rate will move from 1.5%. Nor are any major changes expected in the accompanying monetary policy statement. If there are any changes, they’ll likely be found in the bank’s views on Australian economic growth, the labour market and average mortgage rates compared to a year ago.

“The housing side will again get some attention including several housing lenders raising their mortgage rates recently, the RBA having last month drawn attention to their observation that effective interest rates have come down overall over the past year,” the NAB’s de Garis says.

With little change in tone expected, today’s statement does carry the risk of generating an outsized market reaction if there’s a substantial change in the RBA’s assessment.

There’s little in the way of other major releases scheduled in Asia, likely ensuring a quiet session given Chinese markets will remain closed.

Later in the day, data highlights include Eurozone producer price inflation and the Empire State manufacturing index from the United States. Weekly crude oil inventory data from the US will also be released by the API ahead of official data from the EIA on Wednesday.

On the central bank front, Powell and Quarles from the US Fed will deliver speeches. Haldane and Haskel from the Bank of England will also be in action.

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