The Australian dollar is weaker as hopes for US tax reform start to build

Photo by Clive Rose/Getty Images

After doing next to nothing for close to two days, the Australian dollar finally did something overnight: it fell, at least against the US dollar.

Here’s the scoreboard as at 7am AEST.

AUD/USD 0.7911 , -0.0024 , -0.30%
AUD/JPY 86.67 , 0.21 , 0.24%
AUD/CNH 5.2752 , -0.017 , -0.32%
AUD/EUR 0.6725 , 0.001 , 0.15%
AUD/GBP 0.6168 , 0.002 , 0.33%
AUD/NZD 1.0867 , 0.004 , 0.37%
AUD/CAD 0.9935 , -0.003 , -0.30%

The AUD/USD lost 0.3% for the session, giving back some recent gains as the US dollar strengthened.

The catalyst for the move was renewed optimism surrounding the prospect for US tax reform.

Website Politico reported that some significant strides had been made in shaping tax reforms, citing sources familiar with the talks, noting that there’s broad consensus on some of the ways to allow individual and corporate tax rates to be reduced.

Providing the US dollar further support, Republican house speaker Paul Ryan expressed confidence that tax reforms will be delivered.

“I believe it’s going to be far easier for us to do tax reform than it was, say, for healthcare reform,” Ryan told CNN.

The reports helped to lift US treasury yields, along with the US dollar against the Aussie.

AUD/USD Hourly Chart

However, while the Aussie lost ground against the greenback, it finished mixed against the crosses as a combination of continued strength in commodity prices and positioning adjustments ahead of the Jackson Hole Economic Symposium later in the week made for a messy session for the Aussie.

Turning to the session ahead, it’s likely to be a repeat of what was seen on both Monday and Tuesday.

The economic calendar is devoid of any market-moving events, pointing to the likelihood that the Aussie will be driven by market positioning, movements in Chinese commodity futures and the news flow during the session.

In Australia, skilled vacancy data will be released while in Japan the latest flash manufacturing PMI for August will also be released. Both will come and go without causing a ripple across markets.

Later in the session, traders will receive flash manufacturing and services PMIs from the eurozne, Germany, France and the United States, providing a few catalysts that may generate some volatility in the Aussie.

US new home sales and eurozone consumer confidence figures will also be released.

Robert Kaplan, a voting member on the US Federal Reserve’s FOMC this year, is also scheduled to speak.

NOW WATCH: Money & Markets videos

Want to read a more in-depth view on the trends influencing Australian business and the global economy? BI / Research is designed to help executives and industry leaders understand the major challenges and opportunities for industry, technology, strategy and the economy in the future. Sign up for free at