You really couldn’t ask for a more positive backdrop for the Australian dollar than the global growth outlook which is setting up right now and in prospect for the year ahead. Coming after some solid manufacturing PMIs earlier this week, last night’s release of the services, and associated composite, PMIs were again strong. That points to a solid outlook for global growth in 2018 and reinforces the OECD’s forecast that every economy it covers will be growing in 2018 – the first time in a decade that has been the case.
That’s unequivocally Aussie dollar bullish. And it is why the Aussie dollar has consistently managed to find support on dips.
This morning the AUDUSD is stronger up 0.3% to 7859 but off its high at 0.7875.
Global growth is very positive for the Aussie and a run to 79 is on the cards if today’s data is strong.
But as I pointed out in my daily market analysis, the weakness in the ASX shows Australia is not exactly the investment capital destination of choice right now.
So that’s a mitigant, a handbrake if you will, to a stronger performance.
And as we’ve been discussing recently the reality is that right here and now the US dollar’s move has been a big part of the Aussie’s rally to and then retreat from 81 cents.
That means that whether or not it can break through the resistance at 94.00/15 in DXY terms and 1.1660/80 in Euro terms will be the next big driver for the AUDUSD.
On the day though, the release of retail sales and trade are key data releases which can move the Aussie against the USD and on the crosses.
Retail sales data for August, which the market is forecasting to print a reasonable 0.3%, is going to have more clout than its already sizable market-moving potential. I say that because retail sales give us a chance to judge whether or not Australian households really are as pessimistic as they say they are and whether these concerns about the high debt level are weighing on spending, given that the household savings rate is at a post GFC low of 4.6%. August trade is important as well and after a couple of months where the surplus was lower than forecast – still a surplus though – the market is expecting a surplus of 875 million.
Both releases can move the ASX, interest rates, and especially the Australian dollar.
In other forex news, the US dollar is down, but off the mat this morning after the solid ISM services PMI again reinforced that the fed is likely to stay the course and hike again in December. The trouble for the dollar though is that the strength in the US is not isolated to the world’s biggest economy. Rather the services, and composite, PMI’s for the globe, for France, Germany, and the EU all suggest that the ECB too needs to keep walking the path of withdrawing emergency stimulus. Certainly Austrian central banker, and prominent ECB voice, Ewald Nowotny said overnight that the ECB should not hit “the brakes abruptly” he did highlight that the ECB is “aiming for the prospect of cautious normalisation”. So as the Fed moves so will other central banks. To a certain extent that is a handbrake on this nascent US dollar rally.
This morning we have the Euro at 1.1761 up 0.16% after a run toward 1.18. The Yen is a tiny bit stronger as well with USDJPY down 0.1% at 112.72 after break down through trendline support before bouncing back. The Pound gained a lift from its own decent services PMI print which beat with a print of 53.6. So GBPUSD is at 1.3256 this morning up 0.17%
On the commodity bloc, the Canadian dollar is a little stronger with USDCAD down 0.1% at 1.2470 and the Kiwi is up 0.17% to 0.7169 after again finding support at the 200-day moving average and as traders await meetings between Winston Peters and both of the major parties in New Zealand.
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