The Australian dollar looks set to take a breather after a wild Wednesday


As promised, it was a wild session for the Australian dollar on Wednesday. However, for all the major events that came and went — Australia’s Q2 CPI release, Japan’s fiscal stimulus package and the US Federal Reserve’s July FOMC meeting just to name three — the Aussie is almost exactly back where it was trading 24 hours ago in early Asian trade on Thursday.

After a wild 150-pip trading range, which saw the Aussie rally above .7560 immediately after the Australian CPI release only to tumble as low as .7420 late in the US session, the AUD/USD eventually closed Wednesday trade buying .7490, down just 0.13% from Tuesday’s closing level.

A lot of volatility for not much change, if that makes sense. The 5-minute AUD/USD tick chart sums up the session nicely.

“It was not quite the up session for the AUD yesterday that might have been expected after an OK underlying inflation read,” said David de Garis, senior economist at the NAB, in his Thursday morning note.

“It did briefly spike up toward the .7560 level only to recede back to the figure and below, held back in the afternoon by some strengthening in the yen (lower USD/JPY), following wire stories suggesting the Japanese government was considering issuing 50 year JGBs.”

The other pocket of volatility seen during the overnight session, corresponding with the US FOMC July rate decision, ended up being US dollar negative, says de Garis, helping to underpin a rally in the Aussie.

“The FOMC announced no change in the fed funds rate as expected and with no overt smoking gun that a September rise is in the offing,” he said.

“This saw some selling in the US dollar with compensating rises in the majors and extended a rally in US Treasuries that was already underway, the market this morning still pricing in barely a 50% chance that the Fed will hike rates before the end of this year.”

After a hectic session on Wednesday, the economic data and events calendar quietens on Thursday, which will allow traders to catch their breath before the Bank of Japan announces its July monetary policy decision on Friday. That will almost certainly generate significant financial market volatility, including in the Aussie.

Domestically, Q2 export and import prices (terms of trade) data will be released, although it’s unlikely to stir markets much.

Later in the session, markets will also receive German unemployment, UK house prices along with initial jobles claims and trade figures from the US.

Given the relative dearth of market moving events, and recent trends, any headlines relating to the Bank of Japan policy tomorrow, along with the usual gambit of crude oil futures, USD/JPY and Chinese markets, will likely be influential on the Aussie today.

Here’s the scoreboard, as at 7.55am AEST.

  • AUD/USD 0.7489 , -0.0001 , -0.01%
  • AUD/JPY 78.84 , -0.10 , -0.13%
  • AUD/CNH 4.9953 , -0.0011 , -0.02%
  • AUD/EUR 0.6770 , -0.0001 , -0.01%
  • AUD/GBP 0.5668 , 0.0003 , 0.05%
  • AUD/NZD 1.0578 , -0.0001 , -0.01%

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