The Australian dollar is under pressure as US shoppers splurge

Jeff J Mitchell/Getty Images

The Australian dollar continued to slide on Tuesday, falling to a fresh one-month low against the US dollar.

Here’s the scoreboard as at 6.55am AEST.

AUD/USD 0.7814 , -0.0035 , -0.45%
AUD/JPY 86.49 , 0.45 , 0.52%
AUD/CNH 5.2319 , -0.0181 , -0.34%
AUD/EUR 0.6658 , -0.0004 , -0.06%
AUD/GBP 0.6070 , 0.0017 , 0.28%
AUD/NZD 1.0799 , 0.0034 , 0.32%
AUD/CAD 0.9973 , -0.0012 , -0.12%

The latest bout of weakness, extending the AUD/USD’s losses from July 27 to 3%, coincided with the release of a strong batch of US economic data during the session, said Imre Speizer, senior market strategist at Westpac.

“US retail sales rose 0.6% in July, doubling forecasts, with the various core measures also exceeding expectations. Together with upward revisions to the previous two months, the report supports the view that the consumer sector is in good health, helped by a buoyant jobs market,” he said.

Surveys on manufacturing and construction also delivered strong results.

The New York manufacturing index jumped from 9.8 to 25.2, leaving it at a three-year high. The NAHB Homebuilder sentiment index also impressed, rising to 68 from 64 in July.

As a result of the strong batch of data releases, the Atlanta Fed GDPnow estimate rose by 0.2 percentage points to 3.7% for the September quarter.

It also led to a rise in US bond yields, helping to support the US dollar during the session. It also weighed on the AUD/USD, as seen in the 5-minute chart below.

AUD/USD 5-Minute Chart

The weakness on Tuesday saw the AUD/USD hit a low of .7804, the lowest level since July 18.

The Aussie has now given back half of the gains achieved over the course of July.

AUD/USD Hourly Chart

Whether the Aussie’s weakness will extend into Wednesday’s trading session will likely be determined by the release of Australia’s June quarter wage price index report at 11.30am AEST.

While not traditionally a market-moving release, it’s grown in importance recently given the Reserve Bank of Australia’s (GDP) inflation and GDP growth forecasts are underpinned by an expectation that wage pressures will lift gradually in the years ahead.

That means that this report will also go someway to determining when the RBA begins to lift interest rates. This 10-second guide has further information on what to expect.

Before the release of the wages report, markets will also receive the latest Australian Westpac-MI leading index, a gauge on the the likely pace of economic growth looking three to nine months into the future.

Outside of those releases, the Asian calendar is bare.

Later in the session, the data highlights include unemployment data from the UK, the second reading of Q2 GDP from the eurozone along with housing starts and building permits from the United States.

The minutes of the US Federal Reserve’s July FOMC meeting will also be released at 4am AEST, providing the most likely catalyst to generate short-term volatility in the Aussie.

“The minutes will be assessed to see the degree of conviction the Committee has on the outlook for inflation,” says Rodrigo Catril, currency strategist at the National Australia Bank. “(They’ll) also studied for any hints on the likelihood of the Fed announcing it balance sheet unwind strategy at their next meeting in September.”

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