- The Australian dollar popped higher in late trade on Wednesday, reversing earlier losses to close at a two-week high.
- Progress in easing trade tensions between the US and EU, along with signs that policymakers are rolling out more measures to support the Chinese economy, helped to push risk assets higher.
- The data calendar is quiet in Asia. Later in the session, the ECB will announce its latest interest rate decision. There’s also a swathe of economic data on the way from the United States.
The Australian dollar popped higher in late trade on Wednesday, reversing earlier losses to close at a two-week high.
A reduction in trade tensions between the United States and European Union was behind the Aussie’s late surge.
Here’s the scoreboard as at 7am in Sydney.
AUD/USD 0.7453 , 0.0033 , 0.44%
AUD/JPY 82.7 , 0.20 , 0.24%
AUD/CNH 5.0346 , -0.0183 , -0.36%
AUD/EUR 0.6353 , 0.0005 , 0.08%
AUD/GBP 0.5649 , 0.0005 , 0.09%
AUD/NZD 1.0898 , -0.0009 , -0.08%
AUD/CAD 0.9724 , -0.0036 , -0.37%
After sliding back below the 74 cent level following the release of another weak inflation report in Australia, the AUD/USD reversed those losses late in the session on signs that trade tensions between the United States and European Union are ebbing.
“The EU is giving ground to President Trump on trade and has offered to increase imports of US natural gas, buy more soybeans, and work on lowering industrial tariffs,” said Greg McKenna, Chief Market Strategist at AxiTrader, in relation to a meeting held by US President Donald Trump and European Commission President Jean-Claude Juncker in Washington on Wednesday.
“Love him or hate him, [Trump’s negotiating style is] effective.”
The thawing in trade tensions helped to lift risk assets, including the Aussie dollar, late in the session, seeing the AUD/USD rise to .7464, the highest level since July 10.
“The AUD reversed course thought the afternoon session and overnight, the market paying more attention to the growth-supportive nature of targeted easing measures in China and the positive spill-over from the Juncker-Trump talks,” said David de Garis, Economist at the National Australia Bank.
“Also overnight, the People’s Bank of China (PBoC) was reported to have eased counter-cyclical capital requirements for banks in an attempt to boost lending.”
The newsflow helped to boost commodities and stocks. It also contributed to a sharp reversal in the offshore traded Chinese yuan which strengthened noticeably in the second half of the session, undoubtedly helping the Aussie.
Turning to the day ahead, the data calendar is quiet in Asia, likely ensuring that sentiment and technicals will dictate the Aussie’s direction.
The only local release of note is trade prices for the June quarter, providing a snapshot of the movement in Australian terms of trade.
As has been the case for several weeks, the Aussie will likely take its cues from moves in Chinese financial markets — especially the yuan — once they begin trade from 11am AEST.
Later in the session, the European Central Bank (ECB) will announce its July monetary policy decision at 9.45pm AEST.
“The ECB is widely expected to make no policy changes,” said Elias Haddad, Senior Currency Strategist at the Commonwealth Bank. “The ECB may shed more light on the timing and scale of its first rate hike.”
Aside from that event, markets will also receive jobless claims, durable goods orders, goods trade balance and wholesale inventory data from the United States.
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