The Australian dollar found its footing overnight, rallying hard on the back of firmer commodity prices, dovish central bank language and renewed political concerns in the US.
As the scoreboard below as at 7am AEST reveals, the Aussie put in a strong showing during Tuesday’s session.
AUD/USD 0.7635 , 0.003 , 0.39%
AUD/JPY 86.98 , 0.26 , 0.30%
AUD/CNH 5.1900 , 0.0144 , 0.28%
AUD/EUR 0.6657 , -0.0013 , -0.19%
AUD/GBP 0.5943 , 0.0039 , 0.66%
AUD/NZD 1.0562 , 0.0116 , 1.11%
While the US dollar softened on the back of renewed US political concerns surrounding Russian involvement in the US presidential election, Elias Haddad, senior currency strategist at the Commonwealth Bank, said that there were other factors that led to the Aussie’s revival.
“AUD/USD traded higher overnight to 0.7643 supported by firmer iron ore prices,” he said. “Iron ore prices rose to near a two-month high of $65.40 a tonne.”
He also said that comments from FOMC voter Lael Brainard also underpinned the Aussie’s rally.
“Brainard warned that once a balance sheet runoff begins she would want to assess progress on inflation before supporting another rate hike. So softer US June core CPI inflation on Friday can further weigh on US interest rate futures and the USD,” he said.
As a result of those factors, the AUD/USD closed the session with a gain of around 0.4%.
Against the crosses, the Aussie also put in a stonking performance against the New Zealand dollar and UK pound during the session.
The Kiwi was whacked following the release of a soft credit card spending report for June earlier in the session while the pound was undermined by cautious remarks from Ben Broadbent, deputy governor at the Bank of England.
Continuing the theme seen earlier in the week, much of the market-moving events are scheduled to arrive later in today’s session.
In Australia, the latest Westpac-MI consumer sentiment report will arrive at 10.30am AEST, although it’s unlikely to cause any movement in the Aussie.
There’s nothing else of note on the Asian data calendar, likely ensuring that ebbs and flows in the Aussie will be dictated by sentiment, movements in Chinese commodity futures and oscillations in the Japanese yen, often influential on the US dollar index in Asia.
Later in the session, markets will hear from US Federal Reserve chair Janet Yellen who will appear before the House Financial Services Committee. Although there’s always room for surprise from these events, if recent history is anything to go by, it’s likely to come and go without creating too much of a stir across markets.
The semiannual testimony will begin at midnight AEST.
Outside of Yellen’s appearance, the other big event will be the Bank of Canada’s (BoC) July monetary policy decision. After hawkish commentary from several leading BoC officials over the past month, markets expect that the bank will lift official interest rates for the first time since late 2010.
It too will be announced at midnight AEST.
Other highlights will include the release of US unemployment and eurozone industrial production data.