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The Aussie flips its performance from last week, coming in second to last thanks mainly to negative Chinese related data.

Overlay of AUD Pairs & Gold (Black Line): 1-Hour Forex Chart
Overlay of AUD Pairs & Gold (Black Line): 1-Hour Forex Chart

Australia Headlines and Economic data

Major Market Drivers for the Australian Dollar

As usual, global risk sentiment was likely a contributing factor to the Aussie’s relative performance this week, but arguably less of a factor for directional cues as Australian and Chinese headlines and data seemed to have significant affects on Australian dollar pairs. But for a quick rundown of what drove global risk sentiment, check out my review of this week’s risk sentiment drivers and broad market behavior in my Japanese yen weekly review here.

Aussie pairs kicked off the week with the broad risk-on lean, but turned bearish into Tuesday’s trade, likely on a combination of worries on housing from the latest RBA monetary policy meeting minutes and weak car sales data coming out from China.

Sentiment on the Aussie broadly shifted on Tuesday during the U.S. trading session, likely due to combination of factors outside of Australia that correlated with the move: Improving U.S.-China trade story sentiment after U.S. President Trump signals that the March 1 deal deadline could be extended and possibly on broad USD weakness after the U.S. seeks a pledge from China that it will not devalue its yuan currency.

Wednesday’s price action was pretty stable as traders were likely in a holding pattern ahead of the main scheduled event of the week for the Aussie: the monthly Australian jobs report. This number came in much better-than-expected at 39K net job adds versus the previous read of just under 17K jobs, and the unemployment rate held at 5%–a seven-year low!

Understandably, Aussie pairs popped higher on the surprise news but unfortunately for Aussie bulls, there was no follow through move because not too far behind were bearish Aussie catalysts. First, Westpac Bank cuts its economic growth forecast from 2.6% to 2.2% and its interest rate forecast for Australia to two rate cuts this year. But the bigger move came after a report that China will restrict Australian coal imports, likely in retaliation to Huawei 5G ban.

The bearish sentiment persisted through the London and U.S. trading sessions on Thursday, but eventually found a bottom early in the Friday Asia session after RBA Governor Lowe gave his testimony to the House of Representatives’ Standing Committee on Economics in Sydney. Governor Lowe gave mostly positive comments, expecting the unemployment rate to fall to 4.75% and inflation to reach 2.25% over the next couple of years, and that they will continue to remain flexible and open to rate cuts if the economy falters.  And it’s also likely that Aussie pairs found a bid on Friday due to external factors like improving risk sentiment on the U.S. trade deal story, but more notably on the report from China denying an official ban on Australian coal imports.