The Australian dollar was volatile overnight but in the end went nowhere

Photo by Scott Barbour/Getty Images

The Australian dollar endured a volatile session overnight but in the end went nowhere, initially rising on optimistic remarks from RBA governor Philip Lowe before giving back all those gains after US president Donald Trump said he’d announce a “phenomenal” tax plan within the next two or three weeks, putting a rocket under the US dollar.

Here’s the current Australian dollar scoreboard at at 8am AEDT:

  • AUD/USD 0.7627 , -0.0018 , -0.24%
  • AUD/JPY 86.39 , 0.82 , 0.96%
  • AUD/CNH 5.2337 , 0.0043 , 0.08%
  • AUD/EUR 0.7153 , 0.001 , 0.14%
  • AUD/GBP 0.6100 , 0.0005 , 0.08%
  • AUD/NZD 1.0599 , 0.008 , 0.76%

And here’s the 5-minute chart from overnight showing the wild-yet-boring price action, depending on your time frame:

The Aussie initially rose on remarks from Lowe during a speech delivered to the A50 Australian Economic Forum in Sydney, specifically the view expressed by the governor that it was “hard to say if Australian dollar is too high given the reasonable growth outlook”.

That lack of concern provided a green light to traders to buy, and buy they did.

However, Trump’s tax plan trumped Lowe’s remarks, leaving the Aussie almost exactly where it was when Asian trade rapped up Thursday.

On Friday, much like Thursday, trade in the Aussie will likely be influenced by the RBA, this time with the release of the bank’s quarterly Statement on Monetary Policy (SoMP) at 11.30am AEDT, particularly its updated forecasts for GDP and inflation.

Although recent commentary from the RBA has largely outlined what to expect, there’s likely to be plenty of interest on the bank’s underlying inflation forecasts for 2019 which will be communicated in the SoMP.

Previously, it saw the mid-point of its underlying inflation forecasts only hitting the bottom of its 2-3% inflation target, so many will be watching to see whether it sees it returning to within the target in 2019.

There’s also likely to be interest on the bank’s views towards the housing market and employment, particularly after Lowe said they were watching these areas closely in his speech overnight.

Outside of the SoMP, Australian housing finance figures for December will also be scrutinised, particularly the level of lending going to investors given the resurgence seen in the second half of 2016.

It’ll be released at 11.30am AEDT, alongside the SoMP.

Chinese trade data for January is also scheduled to arrive around 1pm AEDT, with markets expecting year-on-year growth in the value of imports and exports of 10% and 3.3% respectively in US dollar terms, thanks to stronger demand and low base effects from the rise in commodity prices seen over the past year.

Given the timing of the Lunar New Year holiday in late January, this has the potential to create distortions in the data, as it has done so in the past.

On the data calendar later in the session, markets will also receive the University of Michigan consumer confidence survey along with trade prices from the United States.

The International Energy Agency (IEA) will also release its monthly oil market report.

There’s a smattering of other data scheduled during the session, although none appears likely to create a stir across markets, including in the Aussie.

Japanese prime minister Shinzo Abe will also meet with US president Donald Trump to discuss trade, an event that has potential to create volatility across currency markets. A press conference between the two is expected to occur around 5am AEDT Saturday.

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