It was a mixed week for the Aussie dollar when positive economic data runs into surprise negative news from Australia and shifting global risk sentiment.
Major Market Drivers for the Australia Dollar
The correlation with Australian dollar pairs was mixed to start the week despite global risk sentiment going negative after China reports 6.5% GDP growth last year–the slowest pace since 1990. Eventually we did see uniform weakness in Aussie pairs as this news was likely priced in, and it’s likely growth concerns from other parts of the globe (like Europe) and U.S.-China trade talk setbacks were factored into weaker risk sentiment as well.
It wasn’t until the Thursday morning Asia session that we saw uniform price action among Aussies, starting with the positive Australian jobs data, showing a fall in the jobless rate in December and better-than-expected net increase of 21.6K new jobs. The Aussie popped higher across the board, but unfortunately for the bulls, the move was quickly overshadowed by surprise news that the National Australia Bank will raise mortgage rates by 12 to 16 basis points. This sent the Aussie lower right away on the idea that this is somewhat of a rate hike on the economy, which may now prompt the Reserve Bank of Australia to potentially cut its own cash rate to balance the mortgage rate bump out.
Finally on Friday, we did get somewhat of a uniform move as global risk sentiment took a turn towards positive, likely on the net positive U.S. tech earnings and a temporary end to the partial U.S. government shutdown. And it’s likely the speculation of the Fed being possibly close to ending its balance sheet reduction program that gave gold and the Aussie that little extra boost to avoid being the worst performer of the week.
Australia Headlines and Economic data
- Australia Flash Manufacturing PMI comes in at 54.3 vs. 54.0 previous
- National Australia Bank raises mortgage rates, sends A$ sliding
- Australia employment stays solid, jobless rate at six-and-a-half-year lows