It’s going to be a mammoth session for Australian dollar traders

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The Australian dollar put in an eerily familiar performance overnight, rising strongly in European trade before giving back most of those gains in the second half of the session, mirroring exactly what happened on Monday.

In the end, the Aussie finished higher against the greenback and all major crosses, supported by some enormous moves in commodity markets such as crude, iron ore and copper which all gained more than 2%.

Here’s the scoreboard just before 7am AEST.

AUD/USD 0.7935 , 0.0013 , 0.16%
AUD/JPY 88.78 , 0.77 , 0.87%
AUD/CNH 5.3617 , 0.0164 , 0.31%
AUD/EUR 0.6813 , 0.0011 , 0.16%
AUD/GBP 0.6092 , 0.0013 , 0.21%
AUD/NZD 1.0696 , 0.0048 , 0.45%
AUD/CAD 0.9925 , 0.0019 , 0.19%

The Aussie put in some particularly strong performances against the Japanese yen and New Zealand dollar.

The strength against the yen mirrored risk sentiment across broader financial markets, boosted by strong US corporate earnings and strength in US economic data.

It also rallied against the Kiwi, something that Westpac senior market strategist Imre Speizer says may have been prompted by news of a disease outbreak detected in one New Zealand dairy cow herd.

Milk products are New Zealand’s largest goods export by dollar value.

The Aussie’s gains were more modest against the other major crosses, a factor partially driven by the upcoming release of several market-moving events both at home and abroad over the next 24 hours.

Here’s the 5-minute AUD/USD chart since the beginning of the week, showing the pattern of rising in Europe before giving back ground in US trade.

AUD/USD 5-Minute Chart

While the AUD/USD has been range trading so far this week, there’s a strong possibility that will come to an end today.

There’s plenty of risk events arriving, starting in just a few hours time.

Domestically, all attention today will be on the release of Australia’s June quarter consumer price inflation (CPI) report at 11.30am AEST, along with a speech from RBA governor Philip Lowe some 95 minutes later at 1.05pm AEST.

For the inflation report, core inflation — of significant importance on the outlook for official interest rates — is expected to increase by 0.5%, leaving the year-on-year rate unchanged at 1.75%.

Headline inflation is tipped to increase by a smaller 0.4%, although that would still see the year-on-year rate lift to 2.2%, the highest level since the September quarter of 2014.

This 10-second guide has further information on what to expect.

Following the CPI report, all attention will then switch to Philip Lowe’s speech to the Anika Foundation Luncheon in Sydney. It’s entitled ‘The Labour Market and Monetary Policy’, all but ensuring that it will move Australian financial markets one way or another.

“We expect Lowe to point out that despite the robust growth in employment in the past four months, there is still some slack in the labour market that is weighing on wage growth,” said Joseph Capurso, senior currency strategist at the Commonwealth Bank.

Capurso adds that “if Lowe wants a lower AUD then he has an opportunity to hose down growing speculation that the RBA may deliver a rate hike before year end”.

That’s clearly a risk given the views shared by his deputy Guy Debelle last Friday.

Outside of Australia, the other major risk event today will be provided by the release of the US Federal Reserve’s July monetary policy decision.

No one is expecting that rates will move, ensuring that the tone of the statement will dictate market direction in the absence of updated economic projections and press conference from chair Janet Yellen.

“We expect the FOMC to be happy with the progress in reducing slack in the labour market,” says Capurso. “However, there is a risk the FOMC expressed some caution about the recent easing in inflation in wages and prices which may push the USD lower tomorrow.”

It will be released at 4am AEST Thursday.

Outside of those events, markets will also receive the first reading of Q2 UK GDP, consumer sentiment readings from France and Italy along with weekly US crude oil inventory levels from the EIA.