It looks set to be a volatile session for the Australian dollar

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The Australian dollar ripped higher overnight, hitting a high of .7605 against the US dollar before easing in recent trade.

However, as seen in the scoreboard below, the Aussie actually underperformed by some margin against the major crosses:

  • AUD/USD 0.7583 , 0.0031 , 0.41%
  • AUD/JPY 85.58 , -0.33 , -0.38%
  • AUD/CNH 5.1767 , -0.0011 , -0.02%
  • AUD/EUR 0.7024 , -0.0036 , -0.51%
  • AUD/GBP 0.6030 , -0.0016 , -0.26%
  • AUD/NZD 1.0332 , -0.0032 , -0.31%

The major move in currency markets overnight — explaining the unusual looking Aussie dollar scoreboard — was broad-based US dollar weakness, something that came courtesy of more jawboning of the US dollar by Donald Trump and his advisory team, disappointing US economic data and a raft of hotter-than-expected inflation readings in Europe.

Peter Navarro, the head of US president Donald Trump’s new National Trade Council, delivered the major market-moving statement for the session, telling the Financial Times that Germany is using a “grossly undervalued” euro to “exploit” the US and its EU partners.

That was followed up by remarks from Trump himself that other nations had used currency devaluation to benefit their own economies.

Those remarks, along with robust European inflation data, weighed heavily on the US dollar during the session. And while the Aussie also gained, weaker investor sentiment kept its gains in check, ensuring it was under pressure against the crosses.

AUD/USD Hourly Chart

Being the first day of the month, Asian trade on Wednesday looks set to be dominated by a series of manufacturing purchasing managers indices (PMI) reports that will be released, headlined by figures from China, the eurozone and United States.

In Asia, most attention will be on the Chinese PMI figure that will be released at midday AEDT. It’s expected to print at 51.2 in January, down from 51.4 in December.

Markets will also receive readings from Australia, Japan and South Korea during the session.

Australian markets will also receive January house price data from CoreLogic at 10am AEDT, a report that has perhaps taken on more significance recently given the increased influence financial stability concerns now play in terms of monetary policy settings from the RBA.

Aside from the raft of manufacturing PMI reports that will be released in Europe and North America, markets will also receive January’s ADP national employment report in the US — a forerunner before Friday’s non-farm payrolls report for January — with a gain in private-sector payrolls of 165,000 expected.

That will be followed by the release of the US Federal Reserve’s latest monetary policy decision at 6am AEDT on Thursday.

While almost no one expects that the Fed will hike rates, David de Garis, director of economics at the National Australia Bank, says that markets “will be most interested in whether the statement will be anything more specific on timing and whether the 15 March meeting is ‘seriously live’ or not” in terms of another rate increase being delivered.

“The market is currently pricing in 9 basis points of tightening for that meeting, [implying] a 37% chance of a hike,” he says.

The statement will almost certainly generate significant financial market volatility, including in the Aussie dollar, once it’s released.

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