The Australian dollar fell in overnight trade, pressured by a strong private-sector payrolls report in the United States which lifted treasury yields and the US dollar.
According to the ADP, payrolls increased by a whopping 298,000 in February, well ahead of forecasts for a smaller gain of 190,000. It was the highest total since April 2014, further boosting the prospects for a rate hike from the US Federal Reserve on March 15.
“This one data points sufficed to push US bond yields back up, to 2.58% at 10 years and 2.11% at 5 years, their highest levels since mid-December and so challenging the range highs in place since last November,” said Ray Attrill, global co-head of FX strategy at the National Australia Bank.
That helped to push the US dollar higher, pressuring commodity prices as a consequence.
“It does appear that the typical negative correlation between the US dollar and commodity prices — interrupted in the immediate aftermath of Trump’s election win and where commodities received a fillip from the romantic thoughts about massive US infrastructure spending — is reasserting,” says Attrill.
“This in turn means that commodity-linked currencies are flipping from outperformers on the crosses in late 2016 to underperformers now.”
The Australian dollar was not immune to the selling against the greenback, tumbling to .7531, the lowest level since January 30.
- AUD/USD 0.7531 , -0.0053 , -0.70%
- AUD/JPY 86.12 , -0.31 , -0.36%
- AUD/CNH 5.2069 , -0.0211 , -0.40%
- AUD/EUR 0.7142 , -0.0034 , -0.47%
- AUD/GBP 0.6189 , -0.0027 , -0.43%
- AUD/NZD 1.0891 , -0.0004 , -0.04%
With the US dollar on the charge, there’s little on the economic data calendar in Asia on Thursday that appears likely to reverse this trend.
There’s no releases scheduled in Australia, and few across the broader region. Traders will likely cast an eye over consumer and producer price inflation figures from China at 12.30pm AEDT, although it would take a shock result to create a stir in financial markets.
Economists expect CPI to lift by 1.7% year-on-year in February, down from 2.5% in January as food prices retrace following Lunar New Year celebrations.
Producer prices are expected to lift by 7.7% over the same period, up from 6.9% in January, courtesy of low base effects generated by commodity price weakness a year ago.
Later in the session, the ECB’s March monetary policy meeting will be the highlight, although little is expected to change from what was previously communicated by the bank in January.
“Our view here is that it is premature to think Mr Draghi will signal that the end is nigh for its QE policy and -0.4% deposit rate and that the ECB needs to keep the pedal to the metal to ensure too-low inflation/inflation expectations are expunged once and for all,” says Attrill.
In the US, markets will also receive weekly jobless claims figures and Challenger layoffs for February. If recent labour market data is anything to go by, both are likely to exude strength.
Import and export prices for February will also be released.
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