The Australian dollar just can’t gain a solid foothold above the 73 cent level at present, trying and failing yet again in overnight trade.
Here’s the scoreboard as at 7.55am AEST.
AUD/USD 0.7577 , -0.0002 , -0.03%
AUD/JPY 84.44 , -0.03 , -0.04%
AUD/CNH 5.1695 , -0.0012 , -0.02%
AUD/EUR 0.6805 , -0.0001 , -0.01%
AUD/GBP 0.6001 , 0.0001 , 0.02%
AUD/NZD 1.0467 , 0.0003 , 0.03%
The Aussie was undermined by weakness in US stocks, falling commodity prices and renewed strength in the US dollar. However, as for what drove the rally in the greenback, it’s seemingly anyone’s guess given a relative dearth of major events during the session.
To David de Garis, an economist at the National Australia Bank, it certainly wasn’t driven by a plethora of speeches from leading US Fed officials with the tone noticeably more cautious to that conveyed in recent commentary.
“Almost out of default, the USD is higher in a night of virtually no key data, but not getting any clear support from a mixed set of Fed speak with Charles Evans sounding dovish and Kaplan too,” he said on Wednesday morning.
“Evans said that while he still expected to see inflationary pressures, he acknowledged that he was getting very nervous in the light of a multi-month run of low inflation readings.
“Robert Kaplan said that he wants more evidence that recently low inflation are temporary before pushing on with more monetary tightening.”
Both are voting members of the FOMC this year, and the remarks certainly didn’t fit with the strength seen in the US dollar during the session.
Others, such as Elias Haddad, senior currency strategist at the Commonwealth Bank, suggested that the greenback was supported by renewed optimism over potential US tax reforms, along with weakness in the UK pound following dovish remarks from Bank of England (BoE) governor Mark Carney.
“Both speaker of the House of Representative Paul Ryan and treasury secretary Steven Mnuchin noted they expect tax reforms to get done in 2017,” he said.
As For Carney of the BoE, he said in a speech delivered overnight that “given the mixed signals on consumer spending and business investment, and given the still subdued domestic inflationary pressures, in particular anaemic wage growth, now is not yet the time to begin that adjustment (for higher interest rates)”.
That poleaxed the pound, and may have contributed to the US dollar’s strength.
Along with falling base metals prices, a decline in Chinese commodity futures and tumbling crude oil prices, all of those weighed upon the Aussie during the session.
As shown in the hourly chart below, the AUD/USD hasn’t had much success above the .7300 level recently.
“Buyers have stepped in at last Thursday lows of .7563, but tactically we may have seen a short-term top here,” said Chris Weston, chief market strategist at IG Markets.
Turning to Asian trade on Wednesday there’s nothing, and we mean nothing, that appears likely to generate any volatility in the Aussie.
Domestically, the Westpac-MI leading index will be released as will skilled job vacancies. Neither will interest traders.
It’s a similar story across the broader region with no major events scheduled.
Nor is there much to focus on in European or North American trade, with only a smattering of second-tier releases scheduled.
US existing home sales, along with the latest batch of US crude oil inventories data from the EIA, are the only events that carry the potential to move financial markets.
That suggests that investor sentiment and quarter-end positioning will likely dictate movements in the Aussie on Wednesday.