The Australian dollar is rebounding

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The Australian dollar rebounded strongly on Thursday after falling heavily on Wednesday, propelled by higher soft US economic data, a lift in commodity prices and a robust Australian business investment report for the June quarter.

Here’s the scoreboard at 7am AEST.

AUD/USD 0.7944 , 0.004 , 0.51%
AUD/JPY 87.35 , 0.24 , 0.28%
AUD/CNH 5.2384 , 0.024 , 0.46%
AUD/EUR 0.6670 , 0.0021 , 0.32%
AUD/GBP 0.6142 , 0.0028 , 0.46%
AUD/NZD 1.1064 , 0.0094 , 0.86%
AUD/CAD 0.991 , -0.006 , -0.60%

After starting the session buying .7903, the AUD/USD rallied hard in US trade following the release of soft inflation data from the United States.

Core PCE inflation — the US Federal Reserve’s preferred measure of gauging price pressures, rose by just 1.4% in the 12 months to July, leaving it at the lowest level since December 2015.

More importantly, it was below the 1.5% rate reported in the year to June, taking it further away from the Fed’s 2% inflation target.

Other US data released during the session was also slightly underwhelming. US personal consumption grew by 0.3% in July, below expectations for an increase of 0.4%, although income growth did managed to top forecasts with a gain of 0.4%.

Pending home sales also fell by 0.8%, bucking expectations for an increase of 0.5%.

That acted to weaken US treasury yields, placing downside pressure on the US dollar as a consequence.

The greenback was also undermined by comments from US treasury secretary Steve Mnuchin that a weaker USD was “somewhat better” for trade.

Along with the release of a reasonable Australian business investment report earlier in the session, that ensured the Aussie screeched higher in the second half of the session, eventually finishing trade at .7946.

AUD/USD 30-Minute Chart

The Aussie also eked out gains against most major crosses during the session with the exception of the Canadian dollar.

It rallied hard on the back of a rebound in global crude prices and strong GDP report that firmed up expectations that the Bank of Canada will hike interest rates again before the end of the year.

Turning to the session ahead, there’s a raft of economic data out today, headlined by the release of US non-farm payrolls for August at 10.30pm AEST.

Economists expect an increase in payrolls of 180,000, leaving the unemployment rate steady at 4.3%.

Perhaps of more importance, average weekly earnings are tipped to increase by 0.2%, leaving the annual increase at 2.6%, up from 2.5% in the July.

As a major contributor to the outlook for US inflationary pressures, this figure could well prove more influential than any other part of the report.

Before the payrolls data arrives, there’s also a smattering of economic data scheduled across Asia and Europe.

In Australia, markets will receive the Ai Group’s manufacturing purchasing managers index (PMI) for August at 9.30am AEST. That will be followed 30 minutes later by CoreLogic’s monthly House Price Index, also for August.

In Asia, manufacturing PMI reports will be released in China, Japan and South Korea. The latter will also release Q2 GDP figures during the session.

In Europe, the manufacturing PMI deluge continues with figures from the eurozone and UK along with the final read of Italian Q2 GDP.

Alongside the payrolls report, ISM manufacturing PMI, construction spending and the final reading of the University of Michigan consumer sentiment report for August will also be released in the US.

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