The Australian dollar’s recent slide came to an abrupt end overnight, soaring by over 1% against the US dollar, UK pound and Euro.
Here’s the scoreboard as at 6.55am AEST:
AUD/USD 0.7925 , 0.0107 , 1.37%
AUD/JPY 87.33 , 0.82 , 0.95%
AUD/CNH 5.2999 , 0.0661 , 1.26%
AUD/EUR 0.6734 , 0.0073 , 1.10%
AUD/GBP 0.6146 , 0.0072 , 1.19%
AUD/NZD 1.0837 , 0.0036 , 0.33%
AUD/CAD 0.9999 , 0.0028 , 0.28%
As the scoreboard reveals, the Aussie’s gains were most pronounced against the US dollar, ripping higher on the back of renewed political turmoil in the United States and doubts over whether the US Federal Reserve will hike rates again this year.
After slowly climbing over the course of Asian and European trade, the Aussie’s rally went into overdrive following the release of this Tweet from US president Donald Trump.
Rather than putting pressure on the businesspeople of the Manufacturing Council & Strategy & Policy Forum, I am ending both. Thank you all!
— Donald J. Trump (@realDonaldTrump) August 16, 2017
After several business leaders quit Trump’s advisory councils to protest his remarks surrounding violence in Virginia earlier in the week, Trump promptly dissolved both groups, creating renewed concerns as to whether he’d be able to deliver tax reforms and boost infrastructure spending.
That saw the US dollar weaken across the board, reversing modest gains earlier in the session.
The dollar was given a further kick following the release of the US Federal Reserve’s July FOMC meeting minutes which raised fresh doubts as to whether it would lift rates again this year given continued weakness in inflation readings.
“Most participants indicated that they expected inflation to pick up over the next couple of years from its current low level and to stabilise around the Committee’s 2% objective over the medium term,” the minutes read.
However, “many participants saw some likelihood that inflation might remain below 2% for longer than they currently expected, and several indicated that the risks to the inflation outlook could be tilted to the downside.”
Those remarks, along with indecision among the committee as when to announce a start date for the normalisation of its balance sheet, weighed on US bond yields, seeing the US dollar sink lower as a consequence.
And, as seen in the 5-minute chart below, it placed a rocket under the Australian dollar, seeing the AUD/USD lift by more than 1.3%, leaving it a one-week high.
Whether the Aussie can maintain that form on Thursday will largely be determined by the release of Australia’s July jobs report at 11.30am AEST.
After four months of strong employment gains, another solid increase of 20,000 is expected to arrive today. The unemployment rate is tipped to remain steady at 5.6%.
This 10-second guide has further information on what to look out for anyone trading around the release.
Outside of the Aussie jobs report, markets will also receive Japanese trade figures and New Zealand producer price inflation data during the session. Neither is likely to move the Aussie.
In European and US trade, data highlights include UK retail sales, the final reading of Eurozone inflation for July along with industrial output, Philadelphia Fed manufacturing survey, weekly jobless claims and the Leading Index from the US.
On the central bank front, the European Central Bank will also release the minutes of its July monetary policy meeting.
“Markets will be looking at any discussion around the Asset Purchase Program given the language was unchanged in the post-meeting statement despite the previous minutes noting this item is being discussed,” says Tapas Strickland, an economist at the National Australia Bank.
“Any hints of worry around the ongoing surge in the Euro will also be observed.”