The Australian dollar’s latest bout of weakness didn’t last long

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The Australian dollar has opened the new trading week just above the US 79 cent level.

Here’s the scoreboard as at 8am AEST.

AUD/USD 0.7905 , -0.0006 , -0.08%
AUD/JPY 87.86 , 0.02 , 0.02%
AUD/CNH 5.3406 , -0.0018 , -0.03%
AUD/EUR 0.6773 , -0.0002 , -0.03%
AUD/GBP 0.6081 , -0.0004 , -0.07%
AUD/NZD 1.0612 , 0.0013 , 0.12%
AUD/CAD 0.9913 , -0.0007 , -0.07%

After slumping during Asian trade on Friday in response to a speech from RBA deputy governor Guy Debelle in which he poured cold water on the prospect for a near-term rate hike, the Aussie found its poise in the second half of the session, pushing higher on the back of renewed US dollar weakness.

Here’s the AUD/USD 5-minute chart.

AUD/USD 5-Minute Chart

While the AUD/USD finished well below the high of .7989 struck last Thursday following the release of Australia’s June jobs report, Ray Attrill, head of FX strategy at the National Australia Bank, can’t see any catalysts to push the Aussie significantly lower in the the early parts of this week.

“After RBA deputy Governor Guy Debelle did a good job of containing AUD/USD strength on Friday, we wonder how long that will last if the US dollar continues to lose ground,” he said in his Monday morning note. “There doesn’t look to be much to stand in the way of this, in which case AUD/USD is unlikely to extend beyond Friday’s lows at least ahead of RBA Governor Phil Lowe’s lunchtime speech in Sydney on Wednesday.”

That speech, along with the release of Australia’s June quarter CPI report at 11.30am AEST on Wednesday, will likely drive the Aussie’s direction this week, says Elias Haddad, senior currency strategist at the Commonwealth Bank.

“In line with consensus, we anticipate the policy relevant underlying measure of inflation — the average of weighted median and trimmed mean CPI — to increase by 0.5% in Q2, leaving the year-on-year rate at 1.7%,” Haddad says.

“A higher underlying CPI print above 0.5% will support an upward revision to Australian interest expectations in favour of AUD, but a lower underlying CPI print below 0.5% will weigh on AUD against most major currencies.”

With nothing on the local economic calendar today, the Aussie’s movements are likely to be influenced by the USD/JPY and Chinese commodity futures, at least in Asian trade.

On the data front, markets will receive Japanese flash manufacturing PMI data for July at 10.30am AEST. That will be followed by flash manufacturing and services PMI reports for July from Europe and the US later in the session.

While these could generate some movement in currency markets during the session, they’ll likely be overlooked on this occasion due to the release of major market-moving events — including the US FOMC’s July monetary policy decision — later in the week.