The Australian dollar had a wild session, but in the end closed flat

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The Australian dollar endured a wild session overnight, falling from as high as .7350 against its US namesake to a low of .7264 before recovering into the New York close.

As at 8.30am AEDT the AUD/USD currently buys .7323, largely in line with Thursday’s Asian close.

Ray Attrill, global co-head of FX strategy at the NAB, explains the catalyst behind last night’s mid-session decline.

“The fundamental catalyst for much of the price action was US CPI, where the core rate rose by 0.2% against the 0.1% consensus (headline was -0.2% as expected, held down by a 9% drop in petrol prices),” he wrote in his morning note earlier today.

“The core print lifts the annual rate of increase to 1.9% from 1.8% and 1.6% at the start of the year. The biggest driver of the rise was rents, which have a higher weight in CPI than the Fed’s preferred PCE deflator measure; there is no guarantee that the latter will be following CPI higher just yet.”

While the Aussie trades largely unchanged against the US dollar, it gained significantly against the euro following dovish remarks from ECB governing council member Ewald Nowotny.

“The other significant market mover overnight proved to be comment from Austrian central bank chief and ECB Governing Council member Nowotny, whose remarks that the ECB is ‘clearly’ missing its price stability target led some to conclude this increase the odds of the ECB adding to either the intensity or duration of its current QE programme as early as December,” wrote Attrill.

The remark saw the AUD/EUR jump from .6362 to its session high of .6453 as a result.

With no market moving data releases scheduled domestically or regionally today, markets will be eyeing the release of the RBA’s semi-annual financial stability review at 11.30am AEDT.

With market expectations for further rate cuts building, it will be interesting to see the commentary from the RBA on current risks stemming from the domestic housing market. Any indication that the bank remains concerned about risks in the housing market may pour cold water on recent chatter that interest rates will be cut, potentially as early as November.

Here’s the Aussie dollar scoreboard.

  • AUD/USD 0.7323 , -0.0003 , -0.04%
  • AUD/JPY 87.07 , -0.01 , -0.01%
  • AUD/CNY 4.6471 , -0.0019 , -0.04%
  • AUD/EUR 0.6434 , -0.0001 , -0.02%
  • AUD/GBP 0.4734 , -0.0004 , -0.08%
  • AUD/NZD 1.0687 , 0.0005 , 0.05%

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