The Australian dollar is pushing higher ahead of key economic data from China

Tim P. Whitby/Getty Images

The Australian dollar is up modestly against the greenback but trading mixed against the crosses, a result that largely reflects broad-based US dollar weakness seen during Monday’s session.

Here’s the scoreboard as at 7.50am AEDT.

AUD/USD 0.7688 , 0.0012 , 0.16%
AUD/JPY 86.99 , -0.14 , -0.16%
AUD/CNH 5.1013 , 0.0088 , 0.17%
AUD/EUR 0.6596 , -0.0006 , -0.09%
AUD/GBP 0.5821 , -0.0016 , -0.27%
AUD/NZD 1.1174 , 0.001 , 0.09%
AUD/CAD 0.9863 , 0.0035 , 0.36%

After closing last week at .7676, the AUD/USD traded in a relatively small range during the session, briefly hitting a low of .7656 before rebounding in the second half of the session.

The move was largely due to US dollar weakness, rather than Australian dollar strength.

As for the main factor behind the pullback in the greenback, it was hard to pinpoint what exactly drove it.

“Possible explanations include reports Trump’s tax cuts may be phased in over several years, FBI charges against former campaign staff, and likely announcement of the Fed Chair on Thursday,” said Imre Speizer, senior market strategist at Westpac.

Speculation that US President Donald Trump will appoint Jerome Powell as the next Chair of the US Federal Reserve was certainly a headwind for the dollar with Powell seen as a more dovish appointment compared to other candidates.

That saw traders overlook another plunge in iron ore prices — Australia’s largest export by dollar value — seeing the AUD/USD push back towards resistance layered just below the 77 cent level.

AUD/USD Hourly Chart.

Of the other major currencies, the Aussie rose strongly against the Canadian dollar but fell against the UK pound, the latter likely reflecting increased market confidence that the Bank of England will lift interest rates for the first time since 2007 later in the week.

Looking to the session ahead, there’s plenty of events that could provide the catalyst to generate some short-term volatility in the Aussie.

In Australia, the weekly ANZ-Roy Morgan consumer sentiment index will be released at 9.30am AEDT. That will be followed by new home sales from the HIA 90 minutes later and private sector credit figures from the RBA at 11.30am AEDT.

It’s unlikely that these reports will move the Aussie by any significant margin, although there’s likely to be plenty of interest on the housing and business credit figures in the RBA report.

Regionally, one of the two major events will come from China with the release of manufacturing, non-manufacturing and steel industry PMI data for October at midday AEDT.

“Details in the PMI’s are also going to be important with the new export reading relevant for the AUD,” said Rodrigo Catril, currency strategist at the National Australia Bank.

The new order subindices are a leading indicator on future activity levels and are therefore important in terms of the outlook for Chinese commodity demand.

Besides the raft of PMI readings from China, the other big event in Asia comes from the Bank of Japan who will announced its October monetary policy decision, including updated economic forecasts.

No change in policy is expected, although there is some speculation that the bank will lower its inflation forecasts for the current financial year. If that does eventuate, it will merely act to reinforce the policy divergence between the BoJ and other major central banks in the period ahead.

There is no scheduled time for the decision, although it tends to arrive around 2pm AEDT when the bank has made no major policy tweaks.

Japan will also release unemployment and industrial production figures during the session, although they’re unlikely to generate much interest among traders.

In European and North American trade, data highlights include unemployment, inflation and GDP data from the eurozone along with employment costs, consumer confidence, CaseShiller house prices, Chicago PMI and weekly crude oil inventory data from the EIA in the United States.

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