The Australian dollar just hit a 3-month high

Photo by Guang Niu/Getty Images

The Australian dollar surged to a three-month high overnight, propelled higher by broad-based US dollar weakness and soaring commodity prices.

Here’s the scoreboard as at 7am AEST.

AUD/USD 0.7638 , 0.0056 , 0.74%
AUD/JPY 85.79 , 0.61 , 0.72%
AUD/CNH 5.1964 , 0.0303 , 0.59%
AUD/EUR 0.6714 , 0.0029 , 0.43%
AUD/GBP 0.5909 , -0.0006 , -0.10%
AUD/NZD 1.0453 , 0.0028 , 0.27%

Much of the US dollar weakness came courtesy of hawkish remarks from a leading European central banker, but rather than being driven by ECB president Mario Draghi as was the case on Tuesday, the strength on this occasion was driven by comments from Mark Carney, governor of the Bank of England (BoE).

Speaking overnight at the ECB’s Central Banking Forum in Portugal, Carney said that “some removal of monetary stimulus is likely to become necessary if the trade-off facing the monetary policy committee continues to lessen and the policy decision accordingly becomes more conventional,” adding that the BoE would debate the need for a rate increase “in the coming months”.

That lit a fuse under the British pound, dragging other major currencies sharply higher and the US dollar sharply lower.

The US dollar was also undermined by the release of further weak economic data during the session, this time in relation to the housing market.

The weakness in the dollar, along with surging commodity prices including another 4% rally in iron ore, sent the Aussie sharply higher against most major currencies apart from the pound.

It also left the AUD/USD at its highest level since March 31 this year, breaking above the .7635 level that had capped rallies in recent weeks.

AUD/USD Daily Chart

Whether the Aussie can maintain its bullish momentum today will be largely driven by sentiment with little in the way of market-moving events scheduled, at least in Asia.

New home sales and quarterly job vacancy data will be released domestically, although they’re unlikely to generate much interest among traders.

Later in the session, the data calendar lifts a notch in Europe with German consumer confidence and inflation figures, UK credit data and Eurozone consumer confidence set to be released.

In North America, markets will receive the final read on US Q1 GDP along with weekly jobless claims.

James Bullard, St Louis Fed president, will also speak in London about the US economy and monetary policy. He’s a non-voter in 2017, and seen as being on the dovish side of the monetary policy spectrum.

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