- The Australian dollar rose in Asia but weakened towards the close on Thursday.
- US retail sales tanked in December, falling by the most since the tail end of the GFC.
- All of the big data releases today arrive in the second half of the session. Trade headlines may dominate again in Asia.
The Australian dollar followed a familiar pattern on Thursday, lifting in Asian trade before giving back ground in the second half of the session.
Here’s the scoreboard at 8.15am in Sydney on Friday.
AUD/USD 0.7100 , 0.0012 , 0.17%
AUD/JPY 78.46 , -0.21 , -0.27%
AUD/CNH 4.8117 , 0.0043 , 0.09%
AUD/EUR 0.6288 , -0.0006 , -0.10%
AUD/GBP 0.5549 , 0.0032 , 0.58%
AUD/NZD 1.0386 , -0.0039 , -0.37%
AUD/CAD 0.9438 , 0.0044 , 0.47%
After opening the session at .7088, the AUD/USD once again found a bid in Asia. It finding support from the release of Chinese trade data for January and reports that US President Donald Trump was considering extending a March 1 deadline when higher tariffs on Chinese imports were due to kick in.
While the better-than-expected Chinese trade data was likely augmented by the timing of Lunar New Year holidays in China, and despite can-kicking in US-Sino trade negotiations widely expected, traders lapped up the news, pushing the AUD/USD to as high as .7132.
“The latest news about the US-China trade negotiations is not positive,” said Joseph Capurso, Seior Currency Strategist at the Commonwealth Bank.
“According to Bloomberg, the two sides have not narrowed the gap on structural reforms to China’s economy requested by the US.”
The Aussie slowly gave back ground in European and North American trade, only briefly pausing when the US retail sales report for December was released.
It was a shocker.
US retail sales release for December fell 1.2% in headline terms, 1.4% excluding autos and gas and 1.7% for the so-called Control Group that feeds into GDP Consumption estimates,” said David de Garis, Economist at the National Australia Bank.
“Many analysts were left dumbfounded by the release.”
In response, the Atlanta Fed GDPNow model for Q4 economic growth was revised down from 2.7% to 1.5%. US two and 10-year bond yields also fell in response, weighing on the greenback against the likes of the Japanese yen and euro.
After initially popping higher on the release, the AUD/USD ran into renewed selling pressure, likely reflecting that the result is not a great sign for global economic growth.
It bottomed out at .7074 before climbing into the close, mirroring the movements seen in US stocks. There was little to no response to news late in the session that Donald Trump will declare a national emergency to secure funding for his southern border wall.
Against the crosses, the Aussie rose strongly against the British pound that was once again undermined by Brexit uncertainty.
After a busy few days the economic calendar quietens down on Friday, paving the way for sentiment and headlines towards trade negotiations to determine market direction.
New Zealand migration data, Singaporean GDP, Japanese industrial production and Chinese CPI and PPI data are the headline acts in Asia, although none, including the Chinese numbers, are likely to be of interest to traders.
Chinese President Xi is also expected to meet with with US Treasury Secretary Mnuchin and US Trade Representative Lighthizer in Beijing today, creating the potential for headline risk.
Later in the session, Eurozone trade, UK retail sales and trade prices, industrial production, consumer sentiment and Empire State manufacturing index from the United States all carry the potential to create short-term market volatility.
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