Aussie dollar trading near 76 cents as French election weighs on the greenback

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The Australian dollar is trading just below the 76 cents level as the US dollar continued to come under pressure across the board.

“This is a relatively strong performance for the Aussie, considering the fall in iron ore prices,” said Greg McKenna, chief market strategist at CFD and FX provider AxiTrader.

McKenna added that it’s not a surprise that the Aussie dollar is trading higher this morning.

“Gold is down for the same reason that the Aussie is higher. That is, stocks in the US surged overnight – around 0.9% for the big 3 indexes – and risk assets gained a lift while safe havens lost their bid,” he said.

According to McKenna, the fact that the North Korean missile test failed so quickly and spectacularly over the weekend, led some traders to think that this would lessen tensions.

“I’m not convinced. But the key is the price action in US stocks, in gold, and in the US dollar against the Yen suggests that traders are today less worried than they were Friday or even early yesterday,” McKenna pointed out.

In the meantime, he said a few factors are now weighing on the US dollar.

“We saw a weaker than expected retail sales and CPI on Friday, which both reinforced and precipitated a further downgrade to the Atlanta Fed’s GDP forecast of Q1 GDP to just 0.5%,”

“But another factor that’s likely restraining further US dollar weakness – Aussie dollar gains – is the proximity of the first round of the French presidential election,” McKenna said.

“It’s too close to call right now with the top 4 candidates all hovering either side of 20% (give or take a margin of error),”

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“That’s likely to remain a restraining force this week on US dollar falls,” he said.

Looking specifically at the Australian dollar again there is no doubt where the US dollar and risk appetite goes will be a big influence on prices.

In the meantime, the Reserve Bank of Australia (RBA) minutes will be released this morning.

“I’ll be looking for hints about monetary policy and a little deeper insight into their thinking on the economy,”

“I say that because there were clear concerns that seemed to emanate from the governor’s statement two Tuesday’s ago – and not just about housing,”

“Rather the outlook for the overall level of growth in the economy, and thus an impact on monetary policy setting, seemed a little downbeat,” McKenna said.

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