The Australian dollar is back above 79 cents this morning despite what looks like a mild bout of risk aversion in forex and markets globally overnight.
“The Aussie dollar still strong but traders are frying bigger fish at the moment,” said Greg McKenna, chief market strategist at FX and CFD provider AxiTrader.
He added that global and domestic growth is supporting the Aussie dollar at this stage.
According to McKenna, “It is quite easy to understand the strong performance of the Aussie when you look at the strength of the Australian economy, the outperformance of mining and metals shares recently, and the performance of the global economy.”
Global economies growing in sync for the first time in a decade
For example, he cited a recent report from the Organization for Economic Cooperation and Development (OECD) which said that “for the first time in a decade, the world’s major economies are growing in sync and that all 45 countries tracked are on track to grow this year, and 33 of them are poised to accelerate from a year ago.”
From McKenna’s view, even with a weak US dollar, you can see why metals, iron ore, the shares of mining companies, and the Aussie dollar have been well supported lately.
“It’s more than just futures punters on Chinese Metals exchanges,” he said.
Trump’s threat has less effect than ECB data on forex markets
In other currency news, McKenna said the Trump effect was less important than the European Central Bank (ECB) and data affect in forex markets overnight.ect in forex markets overnight.
“That’s not to say that the president’s hyperbolic threat to shut down the government – and perhaps precipitate a default – didn’t get some attention,” McKenna noted.
“But traders are betting that cooler heads – even the president’s when he gets off the stump – will avoid a shutdown and will raise the debt ceiling.”
He also noted the lack of Trump traction in the prices of the Mexican peso and the Canadian dollar.
The Mexican peso is only slightly up while the Canadian dollar has lost a little against the greenback overnight.
“That means both currencies have lagged the Euro and Yen in their overnight rally – the peso materially – but in the overnight moves you can see little worry about president Trump’s threat to NAFTA,” McKenna said.
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