The Australian dollar is in retreat

Photo by Morne de Klerk/Getty Images

The Australian dollar came under renewed selling pressure in overnight trade, undermined by strength in the greenback fuelled by higher US bond yields.

Here’s the Aussie dollar scorecard as at 7.40am AEDT:

  • AUD/USD 0.7644 , -0.0025 , -0.33%
  • AUD/JPY 86.86 , 0.02 , 0.02%
  • AUD/CNH 5.2523 , -0.0117 , -0.22%
  • AUD/EUR 0.7211 , 0.0003 , 0.04%
  • AUD/GBP 0.6100 , -0.0032 , -0.52%
  • AUD/NZD 1.0649 , -0.0008 , -0.08%

Elias Haddad, senior currency strategist at the Commonwealth Bank in Sydney, said the US dollar benefited from continued speculation over “phenomenal” changes to tax policy to be announced US president Donald Trump in the weeks ahead.

“The reflationary fiscal policies expected to be announced by the Trump administration in the next few weeks are supporting the lift in USD,” he wrote on Tuesday morning.

Along with speculation towards Trump’s tax policies, Haddad said investors may have been positioning for US Federal Reserve chair’s Janet Yellen’s semi-annual monetary testimony before the US Senate Banking Committee later in the session.

“Yellen will likely reiterate her upbeat assessment of the US economic outlook which will further underpin USD,” says Haddad.

With little in the way of economic data released overnight, and with base and precious metals losing ground, it was enough to undermine the Aussie despite the iron ore price — the nation’s largest commodity export by dollar value — hitting a fresh 2.5 year high on Monday.

AUD/USD 5-Minute Chart

After a relative dearth of data releases to start the week, the economic calendar starts to thaw on Tuesday with several major releases scheduled in both Australia and abroad.

Domestically, the National Australia Bank will release its January business confidence survey at 11.30am AEDT, with most interest likely to be centred on whether the strong lift in profitability and sales recorded in December has been maintained.

Before the release, ANZ will also release its weekly Australian consumer confidence report.

While both important indicators on the health of the Australian economy, it’s unlikely that either will have a major impact on the Australian dollar.

Outside of Australia, China will release consumer and producer price inflation figures for January at 12.30am AEDT.

Markets will be watching for signs that higher producer price inflation is translating to higher non-food consumer price inflation, and carries the potential to see the People’s Bank of China (PBoC) tighten monetary setting further should the pass-through between the two be evident.

As such, movements in the USD/CNY, along with USD/JPY, will likely prove influential on broader currency market movements in Asia today.

Later in the session, markets will also receive GDP figures from Germany and the Eurozone, German investor confidence with the release of the monthly ZEW index, along with inflation data from the UK.

It’s a big data session for Europe.

In the US, almost all attention will be on Yellen’s appearance before the US senate banking committee that will begin at 2am AEDT. Markets will also hear from Dallas Fed president Robert Kaplan and Atlanta Fed president Dennis Lockhart later in the session.

On the data front, NFIB small business optimism, along with producer price inflation, will also be released.

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