The Australian dollar came under renewed selling pressure on Wednesday, reversing gains seen earlier in the session. However, it remained above the lows struck on Tuesday.
- The Aussie was weighed down by a modest lift in US bond yields, weaker commodity prices and dovish remarks from RBA Governor Philip Lowe, rather than an escalation in US-China trade tensions.
- The Asia data calendar is quiet today with the exception of New Zealand’s Q1 GDP report. Most of the main events arrive in the second half of the session.
The Australian dollar came under renewed selling pressure on Wednesday, reversing gains seen earlier in the session.
Here’s the scoreboard as at 7am in Sydney.
AUD/USD 0.7368 , -0.0013 , -0.18%
AUD/JPY 81.3 , 0.08 , 0.10%
AUD/CNH 4.7748 , -0.0054 , -0.11%
AUD/EUR 0.6364 , -0.0003 , -0.05%
AUD/GBP 0.5593 , -0.0006 , -0.11%
AUD/NZD 1.0730 , 0.0038 , 0.36%
AUD/CAD 0.9803 , -0.0001 , -0.01%
After climbing above the .7400 level in early European trade, the AUD/USD reversed those gains and more in the second half of the session, weighed down by a modest lift in US bond yields, weaker commodity prices and dovish remarks from RBA Governor Philip Lowe at the ECB central bank forum in Portugal.
The reversal came despite no further escalation in trade tensions between the United States and China on Wednesday.
“Although no news on the trade front is probably good news for the AUD, the precarious emerging markets position remains a thorn for the currency and now we also need to add soft commodities performance to the AUD’s concerns,” said Rodrigo Catril, Senior FX Strategist at the National Australia Bank.
“For now, the AUD/USD continues to find support above the 0.7330 support level but, in our view, the Aussie still looks vulnerable to the downside.”
Greg McKenna, Chief Market Strategist at AxiTrader, also believes the selloff in the Aussie may not be over.
“With the price now back down around 0.7370, it seems to me that the low from a couple of days ago is likely to be tested again,” he says.
“If that level goes — the mid 0.7340’s — then its back below 72 cents for the Aussie.”
As has been the case for several days, geopolitics and central banks look set to dictate the broader market direction on Thursday.
On the data front, the only major release in Asia comes from New Zealand Q1 GDP.
Markets are looking for a quarterly increase of 0.5%, leaving the year-on-year expansion at 2.7%, down from 2.9% in the year to December last year.
The report will be released at 8.45am AEST.
Outside of New Zealand, the Reserve Bank of Australia will release its quarterly bulletin at 11.30am AEST. It often contains a lot of interesting information and views, but it rarely moves financial markets.
In the second half of the session, data highlights include UK public sector borrowing, Eurozone consumer confidence along with initial jobless claims, Philadelphia Fed manufacturing survey and house price index from the United States.
On the monetary policy front, the Bank of England (BoE) will deliver its June interest rate decision at 9pm AEST.
“[The BoE isn’t] expected to move rates tonight but the question is whether they’ll be hinting that a hike is still their next play and whether that hike may come as soon as August,” McKenna says.
“With all the Brexit shenanigans hurting confidence and the economy, I wonder if the BoE won’t simply holsters it weapons and wait til very late this year or maybe 2019.”
The Swiss National Bank will also announce its June monetary policy decision. Like the BoE, no change is expected.
Finally, on the speaking front, BoE Governor Mark Carney and German Bundesbank President Jens Weidmann are both set to deliver speeches.
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