The Australian dollar is gaining across the board

  • The Australian dollar rose across the board on Thursday, paying scant attention yet again to the wild gyrations in global stocks seen during the session.
  • Firmer bulk commodity prices and a reluctance to test technical support may explain the Aussie’s resilient performance.
  • The main data release today comes from the US with the release of advanced Q3 GDP data.

The Australian dollar rose across the board on Thursday, paying scant attention yet again to the wild gyrations in global stocks seen during the session.

Here’s the scoreboard at 8am in Sydney.

AUD/USD 0.7078 , 0.002 , 0.28% AUD/JPY 79.55 , 0.33 , 0.42% AUD/CNH 4.9226 , 0.0217 , 0.44% AUD/EUR 0.6223 , 0.0028 , 0.45% AUD/GBP 0.5521 , 0.0042 , 0.77% AUD/NZD 1.0848 , 0.0043 , 0.40% AUD/CAD 0.925 , 0.0034 , 0.37%

After sliding to as low as .7057 in early trade following a late slump in US stocks on Wednesday, the AUD/USD rose strongly in Asia, ignoring what were large and widespread declines in stocks across the region.

The resilient performance may be explained by strong gains in bulk commodity prices following news that the value of Chinese fixed-asset investment projects approved in the September quarter more than quadrupled from the levels seen in the three months to June.

A reluctance to test prior technical support below .7050 despite the carnage in stocks may have prompted some traders to buy the dip, especially at a time when speculative positioning in the Aussie is extremely short.

“The recent spike in equity volatility has not translated into downward pressure for the Aussie or Kiwi dollars,” said Rodrigo Catril, Senior FX Strategist at the National Australia Bank.

“That said, history would suggest that if equity volatility remains elevated then it is still reasonable to expect both AUD and NZD to eventually succumb to this pressure.”

After briefly re-testing earlier lows in early European trade, the AUD/USD soared to as high as .7099 as North American markets opened, helped by a strong rebound in investor risk appetite.

The upward move stalled at this level, seeing the Aussie edge lower to finish the session buying .7079 against the greenback. The pullback came despite data from the US that point to potential downside risks for US Q3 GDP.

AUD/USD Hourly Chart

Against the major crosses, the Aussie also put in a strong performance, recording gains of between 0.4% to 0.75%.

It rose by 0.45% against the euro as ECB President Mario Draghi acknowledged a recent moderation in economic activity and market concerns surrounding Italy’s proposed 2019 budget following its October monetary policy meeting.

“The main reasons for the overnight decline in the EUR was the ECB’s acknowledgement about a recent slowing in Eurozone economic activity,” said Richard Grace, Chief Currency Strategist at the Commonwealth Bank.

“The ECB also still some concerned about Italy’s upcoming budget, including adherence to the Eurozone budget parameters.”

More broadly, there were no major policy surprises from the ECB, once again reaffirming its monthly asset purchases are likely to end in December with the deposit rate remaining at current levels at “least through the summer of 2019”.

The Aussie also recorded strong gains against the British pound and Japanese yen — the former reflecting ongoing Brexit headlines while the latter was driven by the improvement in risk appetite seen in the second half of trade.

Turning to the day ahead, it looks set to be another session dominated by sentiment, technicals, positioning and headlines given a quiet economic calendar in Asia.

The ABS will release updated GDP data for fiscal year 2018, a release than could include revisions to prior growth estimates. However, markets are forward looking, meaning the release will likely be ignored by traders.

Elsewhere, Japan will release Tokyo CPI figures for October ahead of the national reading in early November.

Later in the session, the main highlight will come from the release of the advanced Q3 GDP estimate from the United States.

“The median estimate for US Q3 GDP annualised is at 3.3% compared to 4.2% in the previous quarter,” says Catril at the NAB. “Overnight the Atlanta Fed now forecast pegged the Q3 GDP at 3.6%.”

Beside that release, the remaining highlights include German, French and US consumer confidence readings.

Draghi and Coeure of the ECB are also scheduled to deliver speeches.