The Australian dollar rallied hard again overnight, continuing to benefit from broad-based US dollar weakness and firmer commodity prices.
Here’s the scoreboard at 8.25am AEST.
AUD/USD 0.7683 , 0.0001 , 0.01%
AUD/JPY 86.14 , -0.02 , -0.02%
AUD/CNH 5.2185 , 0.0008 , 0.02%
AUD/EUR 0.6712 , -0.0002 , -0.03%
AUD/GBP 0.5903 , -0.0001 , -0.02%
AUD/NZD 1.0532 , 0.0016 , 0.15%
Elias Haddad, senior currency strategist at the Commonwealth Bank, said the US dollar weakness overnight was once again driven by shifting monetary policy expectations, especially in Europe.
“USD fell overnight to its lowest level since early October 2016 because of the rising prospects of less accommodative monetary policies from other major central banks like the European Central Bank, Bank of England and Bank of Canada,” he said.
Those views were further reinforced by the release of inflation figures in Europe overnight.
“German and Spanish CPI’s for June… pointed to a better-than-expected print from tonight’s Eurozone CPI by 0.1% if not 0.2%,” said David de Garis, economist at the National Australia Bank. “That added support to the EUR/USD and yields overnight.”
Along with continued expectations for a reversal of monetary policy stimulus in the period ahead, the Aussie also benefited from yet another surge in iron ore spot markets.
The price for benchmark 62% fines jumped by a further 3.8%, extending the gain from June 13 to over 20%.
Iron ore is Australia’s largest goods export by dollar value.
As a result, the AUD/USD jumped to as high as .7686 during the session, leaving it sitting at the highest level since March 22.
The Aussie has now gained 5% against the US dollar since early May.
Turning to Friday’s session in Asia, there are a number of data releases scheduled that carry the potential to move the Aussie.
Domestically, private sector credit figures for May will be released at 11.30am AEST, with most interest likely to fall on the housing component given recent regulatory changes introduced by APRA.
Regionally, China will release manufacturing, non-manufacturing and steel industry purchasing managers indices for June at 11am AEST. Japan will also release inflation, unemployment, industrial production and household spending data for May from 9.30am AEST.
While these have lost some of their market-moving clout in recent years, with sentiment towards monetary policy starting to shift, they each have the potential to generate short-term volatility in the Aussie, particularly the Chinese data.
Later in the session, markets will receive Eurozone CPI, German unemployment and the final read of UK Q1 GDP. Those will be followed by core PCE inflation — the Fed’s preferred measure on price pressures — along with consumption and incomes data for May from the US.
Canada GDP will also be released.