The Australian dollar, mirroring the broader move in riskier assets such as stocks and commodities, came under pressure overnight, undermined by a lift in US bond yields and rumours that the European Central Bank was considering reducing the scale of its asset purchase program.
“EUR/USD spiked up briefly to 1.1240 and AUD/EUR fell 1% just below 0.6800 on a Bloomberg report the ECB is looking at QE tapering scenarios, that include slowing monthly asset purchases by €10bn per month,” said Elias Haddad, senior currency strategist at the Commonwealth Bank.
“According to an unidentified ECB officials there is an informal consensus building among policymakers that asset purchases will need to be tapered before the conclusion of the program,” he said.
That report, along with reasonable US economic data released earlier in the week, saw US bond yield lift as a consequence, helping to boost the US dollar in the latter parts of the session.
US 10-year treasury yields rose by 6 basis points to 1.68%, heaping pressure on the Aussie, stocks and commodity prices.
In the wash up the AUD/USD closed at .7619, down 0.66% for the session. It currently fetches .7612.
After being buffeted by rumours and innuendo on Tuesday, fundamentals are likely to drive movements in the Australian dollar today with major data releases scheduled both domestically and abroad.
At home, most attention will be on the release of Australia’s August retail sales report, due out at 11.30am AEDT, given the observation from the RBA yesterday that Australian household consumption “appears to have slowed a little recently”.
“In July, Australian retail sales were unchanged against expectations of a 0.3% increase and this subdued reading was largely driven by a sharp decline (-6.2%) in the department store category,” said Rodrigo Catril, currency strategist at the National Australia Bank.
“Our economists note that when department store sales fall sharply, they tend to rebound strongly and this relationship underpins our above consensus pick-up in retail sales to 0.4% in August, a rate that is double the market consensus of 0.2%.”
Outside of the retail sales report, markets will also receive the latest Performance of Services Index from the Ai Group at 9.30am AEST.
Later this evening, markets will also receive the September US ISM non-manufacturing PMI report along with ADP private sector payrolls, also for September.
These reports will help shape expectations for the likelihood of a US interest rate hike from the Fed in December, and move the US dollar as a result.
The ADP report will hit at 11.15pm AEDT with the ISM PMI arriving soon after at 1am AEDT.
Alongside these reports, factory orders, revised durable goods orders, international trade and the separate services PMI report from Markit will also be released.
Here’s the Australian dollar scorecard as at 8.15am AEDT.
- AUD/USD 0.7612 , -0.0007 , -0.09%
- AUD/JPY 78.29 , -0.09 , -0.11%
- AUD/CNH 5.0943 , -0.0054 , -0.11%
- AUD/EUR 0.6793 , -0.0005 , -0.07%
- AUD/GBP 0.5980 , -0.0005 , -0.08%
- AUD/NZD 1.0563 , -0.0001 , -0.01%