The Australian dollar fell heavily on Wednesday as robust US economic data, along with somewhat hawkish remarks from US Federal Reserve chair Janet Yellen, put a rocket under the US dollar.
Here’s the scoreboard as at 7.50am AEDT:
- AUD/USD 0.7511 , -0.0055 , -0.73%
- AUD/JPY 85.83 , 0.62 , 0.73%
- AUD/CNH 5.1378 , -0.0073 , -0.14%
- AUD/EUR 0.7063 , 0.0002 , 0.03%
- AUD/GBP 0.6124 , 0.0029 , 0.48%
- AUD/NZD 1.0518 , 0.0034 , 0.32%
Following US economic data showing an uptick in inflationary pressures and a rebound in industrial production in December — helping to spur renewed buying after several days of losses — the US dollar gained a further bid on optimistic remarks from Janet Yellen late in the US session.
Speaking in San Francisco, the Federal Reserve chair she expected the Fed to raise rates “a few times this year” noting that the decision to lift rates in December reflected confidence that the US economy would continue to improve.
She also said the US economy was near maximum employment with inflation moving towards the Fed’s 2% target, noting that it makes sense to reduce monetary policy accommodation “gradually” as the economy approaches the Fed’s dual mandates on employment and inflation.
The US dollar surged as US bond yields rose, seeing the AUD/USD tumble to its session lows just above 75 cents.
With the Aussie already under pressure, whether that trend will be maintained will likely come down to the release of Australian unemployment figures for December, out at 11.30am AEDT.
Markets expect employment to increase by 10,000 for the month, with the unemployment rate expected to remain steady at 5.7%.
Elias Haddad, senior currency strategist at the Commonwealth Bank, believes that outcome would be enough to support the Aussie.
“We anticipate the economy to add 10,000 jobs in December, in line with consensus, and for the unemployment rate to stay at 5.7%,” he wrote on Thursday morning. “This will further reduce odds of an RBA rate cut.”
Aside from the Australian jobs report, there’s very little other data scheduled for release in Asia, likely ensuring that movements in the Japanese yen and Chinese yuan will once again be influential on the US dollar, hence broader currency markets.
Later in the session, the ECB will announce its January monetary policy decision with most interest likely to surround ECB president Mario Draghi’s press conference that will begin at 12.30am AEDT.
There’s also plenty of US economic data on the docket with housing starts, jobless claims and the Philadelphia Fed business survey all scheduled for release.