Although economic reports for Australia printed disappointingly, the Australian Dollar was still able to gain on peers like the Pound and US Dollar during the local session as the People’s Bank of China (PBOC) announced stimulus measures.
The PBOC slashed reserves to increase market-place liquidity and as China is Australia’s main trading partner, the move bolstered the ‘Aussie’.
The Australian Dollar continued trading higher after initially dipping when Australia’s retail sales report showed a smaller-than-forecast increase.
Sales had been expected to increase by a seasonally adjusted 0.3% on the month in December but they actually rose by 0.2% at the close of last year.
On a quarterly basis, sales excluding inflation rose by 1.5% in the fourth quarter following negatively revised growth of 0.9% in the previous three months.
The figures prompted this response from industry expert Francisco Solar; ‘There’s a bit of risk aversion creeping into markets and that’s why markets started the Asian session with a negative tone. The retail figures were just another excuse to keep the Aussie on the lower end of the range. Any numbers that come in now that paint a picture of the RBA cutting again sooner rather than later will keep the ‘Aussie’ under pressure.’
A separate Australian report showed that new home sales dropped by -1.9% on the month in December.
The Australian Dollar managed to extend gains against the US Dollar during the North American session as the US trade deficit was shown to have widened in December.
Instead of narrowing from a negatively revised 39.8 billion US Dollars to 38.0 billion Dollars in December, the deficit widened to 46.6 billion US Dollars – the highest level since 2012.
The data calls into question the fourth quarter US GDP estimate of 2.6%. In the view of economist Gennadiy Goldberg; ‘This brings considerable downside risks to GDP revisions, like shaving 0.3 percentage point.’
Although the US initial jobless claims figure was better-than-expected, the US Dollar remained under pressure ahead of tomorrow’s highly anticipated US Non Farm Payrolls report.
During the Australasian session, the AUD/USD pairing could fluctuate in response to Australia’s AiG Performance of Construction Index and the Reserve Bank of Australia’s monetary policy statement.
Investors will also be taking particular interest in the payrolls report. The US is believed to have added 230,000 positions in January. Any result below this number would be US Dollar-negative.
The Australian Dollar to US Dollar (AUD/USD) exchange rate was trading in the region of 0.7797 during the US European session.
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