The Australian dollar took flight overnight, surging higher on the back of broad based US dollar weakness.
Imre Speizer, senior market strategist at Westpac, said that the US dollar came under renewed selling pressure following remarks from US president-elect Donald Trump that it was “too strong”.
“President-elect Trump said the USD was ‘too strong’ in an interview transcript released earlier by the Wall Street Journal, noting, ‘our companies can’t compete with them (China) because our currency is too strong’,” said Speizer.
Adding further downside pressure, Trump also criticised a key-plank of the House Republicans’ corporate-tax plan — a border tax designed to boost exports and cut imports — telling the WSJ that it was too complicated.
“That triggered a bigger re-think of expectations for stimulus and tax reform under a Trump administration, hitting all the key Trump -‘reflation trades’ — the USD, US yields and US equities,” said Speizer.
It also resulted in some enormous gain for other major currencies — including the Aussie — in overnight trade.
At .7563, the AUD/USD currently sits at the highest level since November 16 last year.
However, as seen the in scoreboard below, the Aussie actually under performed against many of the crosses, none so more than against the UK pound which surged as a hot inflation report for December and well-received speech from UK prime minister Theresa May outlining the nation’s Brexit strategy triggered large bouts of short covering in the GBP.
- AUD/USD 0.7563 , 0.0088 , 1.18%
- AUD/JPY 85.21 , -0.14 , -0.16%
- AUD/CNH 5.1441 , 0.0174 , 0.34%
- AUD/EUR 0.7062 , 0.0014 , 0.20%
- AUD/GBP 0.6097 , -0.0104 , -1.68%
- AUD/NZD 1.0491 , -0.0025 , -0.24%
Turning to Wednesday’s session in Asia, there’s yet again little on the economic data or events calendar that appears likely to move the Aussie one way or another.
Domestically, the Westpac-MI consumer sentiment report for January will be released at 10.30am, although it’s unlikely to generate a reaction given the separate ANZ-Roy Morgan sentiment survey jumped higher at the start of 2017.
Beyond that release there’s almost nothing to speak of, hinting that movements in US bonds yields, along with the Japanese yen and Chinese yuan, will be influential on broader currency market trends.
Later in the session the economic calendar starts to pick up with the release of US CPI, PPI and industrial production figures for December.
Elsewhere, the Bank of Canada will hold its first monetary policy meeting of 2017 — no change is expected — while UK unemployment data for November will also be released.
At 7am AEDT Thursday morning, Janet Yellen, US Federal Reserve chair, is also scheduled to speak from San Francisco.