- The Australian dollar traded in an incredibly small range against the greenback to start the week.
- Soft US economic data, and a tweet from Donald Trump, ensured the broader theme for the session was US dollar weakness.
- There’s not much on the economic calendar on Tuesday to drive market direction.
The Australian dollar had a quiet start to the week, trading in a very thin range the greenback despite some big moves in other major crosses.
Here’s the scoreboard at 7.45am in Sydney.
AUD/USD 0.7170 , -0.0006 , -0.08%
AUD/JPY 80.79 , -0.62 , -0.76%
AUD/CNH 4.9460 , -0.0057 , -0.12%
AUD/EUR 0.6319 , -0.0029 , -0.46%
AUD/GBP 0.5683 , -0.0017 , -0.30%
AUD/NZD 1.0533 , -0.0023 , -0.22%
AUD/CAD 0.9626 , 0.0019 , 0.20%
After opening at .7176, the AUD/USD traded between .7165 and .7187 throughout the session, the smallest daily range since January 1 this year.
While the Aussie had a sleep start to the week, the broader theme for the session was US dollar weakness, in part due to further weakness in leading US economic data.
“Assisting the decline in the broader USD was a large fall in the December Empire manufacturing index to an 18 month low, and a larger-than-expected fall in the National Association of Home Builders Market index to a near three year low,” said Richard Grace, Chief Currency Strategist at the Commonwealth Bank.
“We have previously noted that the interest rate sensitive sectors of the US economy, notably housing and business investment, are slowing.”
Along with soft economic data, this tweet from US President Donald Trump did nothing to ease pressure on the greenback.
It is incredible that with a very strong dollar and virtually no inflation, the outside world blowing up around us, Paris is burning and China way down, the Fed is even considering yet another interest rate hike. Take the Victory!
— Donald J. Trump (@realDonaldTrump) December 17, 2018
Helping to kick the dollar when it was already down, White House trade adviser Peter Navarro described the US Federal reserve “crazy” for signalling that it will continue to raise rates next year.
“The reason why the Fed shouldn’t raise interest rates on Wednesday is not because the economy’s slowing down, but because the economy’s growing without inflation,” Navarro said in an interview with CNBC.
“I think what the Fed should do, is simply do what it says it’s going to do, which is look at the data … rather than just saying you’re going to raise rates three times in the next year — that was crazy. Look at the data.”
The US Federal Reserve begins its two-day FOMC meeting on Tuesday with financial markets continuing to price in a 75% probability of a 25 basis point increase in the Fed funds rate.
Along with political pressure on the Fed, concerns about a partial US government shutdown beginning later in the week may also be weighing on the dollar.
Despite the weaker greenback on Monday, another sharp plunge in US stocks, along with weakness in crude oil futures, ensured the Aussie’s moves were kept to a minimum.
Turning to the session ahead, there’s little on the economic calendar that will interest traders.
New Zealand business confidence figures will arrive at 11am AEDT, 30 minutes before the release of minutes from the RBA’s December monetary policy meeting.
Being more elongated that the short post-meeting policy statement, the minutes are often far more interesting for market participants. However, being two weeks old, whether that will be enough to drum up interest among traders, particularly a week before Christmas, is debatable.
“Our sense is that we probably need to wait until the New Year for any clues on how the soft GDP figures have impacted the RBA’s growth outlook,” says Rodrigo Catril, Senior FX Strategist at the National Australia Bank.
“Markets will also likely focus on any Board discussion on housing market developments, given recent concerns by RBA speakers over undue credit tightening moves by some banks.”
Chinese President Xi Jinping will also deliver a speech ahead of the government’s Central Economic Work Conference (CEWC) that is expected to begin on Wednesday.
Later in the session, other highlights include German business sentiment along with housing starts and building permits from the United States.
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