The Australian dollar sits near multi-year lows ahead of key economic data

Haziq Qadri / Barcroft India / Barcroft Media via Getty Images
  • The Australian dollar remains pressured despite a modest improvement in investor risk appetite.
  • US President Donald Trump offered a more conciliatory tone on trade talks with China during Tuesday’s trading session, helping to spark a modest rebound in stocks and commodities. Currency markets were less enthusiastic.
  • Australia’s Q1 wage price index will be released on Wednesday. A raft of major Chinese economic indicators will also be released.
  • Other data highlights coming up include Eurozone GDP along with US retail sales and industrial production.

The Australian dollar remains pressured with traders paying scant regard to a modest rebound in stocks and commodities on Tuesday.

Here’s the scoreboard at 7am in Sydney on Wednesday.

AUD/USD 0.6943 , 0 , 0.00%
AUD/JPY 76.09 , 0.20 , 0.26%
AUD/CNH 4.7936 , -0.0048 , -0.10%
AUD/EUR 0.6195 , 0.001 , 0.16%
AUD/GBP 0.5380 , 0.0023 , 0.43%
AUD/NZD 1.0556 , -0.0012 , -0.11%
AUD/CAD 0.935 , -0.0012 , -0.13%

With the exception of the Japanese yen and British pound, the movements in the AUD elsewhere were negligible despite renewed confidence from US President Donald Trump that a trade deal with China will be reached.

Trump described the recent escalation in trade tensions with China as “a little squabble”. He also denied that recent tariff increases meant that trade talks had broken down.

“We’re having a little squabble with China because we’ve been treated very unfairly for many, many decades,” Trump told Reuters. He added later that: “We have a dialogue going. It will always continue.”

That followed a string of tweets from Trump earlier in the session that were far more conciliatory in tone compared to those seen over the past week.

“When the time is right we will make a deal with China. My respect and friendship with President Xi is unlimited but, as I have told him many times before, this must be a great deal for the United States or it just doesn’t make any sense,” Trump wrote.

As for the prospects of a deal, Trump claimed “it will all happen, and much faster than people think!”

The flurry of trade-related headlines and tweets helped stocks and commodities rebound after big falls to start the week. However, the gains were modest and largely unconvincing, suggesting there’s still a fair degree of angst in markets about the prospect of near-term trade deal.

Currency markets, including the AUD/USD, were disinterred in the news flow, trading in narrow ranges throughout the session.

Investing.comAUD/USD Hourly Chart

Looking ahead, trade headlines and tweets will remain the main driving force despite a busy data calendar in Asia.

Domestically, the Westpac-MI Consumer Sentiment report for May will be released at 10.30am AEST. That will be followed an hour later Australia’s wage price index for the March quarter – a release that has taken on increasingly significant importance given its implications for household spending and inflation.

“The wage report and Thursday’s Australian April labour force report will largely make or break the case for a RBA rate cut in June,” said Joseph Capurso, senior currency strategist at the Commonwealth Bank.

“While there has been improvement in the labour market, there are only limited signs of improvements in wage growth because the underemployment rate is high.”

Capurso said a weak result today will “increase market pricing for a June RBA rate cut and push AUD/USD down further by around 50 pips”.

This 10-second guide has more on what to expect in the wages report.

Regionally, China will release a raft of monthly activity indicators on retail sales, industrial output and fixed asset investment in urban areas during April at 12pm AEST.

According to forecasts offered to Thomson Reuters, industrial output is expected to increase 6.5% from a year earlier, down from the multi-year high of 8.5% reported in March. Retail sales are seen lifting 8.6% from a year earlier, down marginally from 8.7% in the 12 months to March.

Between January and April, fixed asset investment in urban areas is tipped to grow 6.4% from the same period a year earlier, up marginally from the 6.3% increase seen in the first three months of the year.

The performance of Chinese markets following the data, especially the Chinese yuan, will likely be influential on broader sentiment levels in the second half of Asian trade.

Later in the session, other data highlights include German Q1 GDP, Eurozone unemployment and Q1 GDP, CPI from France and Canada along with retail sales, Empire State manufacturing index and industrial production from the United States.

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