Counter currency catalysts and global risk sentiment were factors in what was a diverse week of performance among Aussie pairs.
Australia Headlines and Economic data
- Australia home loans decline -2.6%
- Business conditions fell by 3 pts to +4 index points in February
- Souring consumer mood in Australia may prompt RBA rate cut soon
- Australia, New Zealand dollars pressured as bond yields keep falling
- China industrial output growth falls to 17-year low, more support steps expected
Major Market Drivers for the Australian Dollar
Headlines and economic updates from Australia were scarce this week, so suffice it to say that global risk sentiment and counter currency catalysts were likely the bigger drivers for Aussie pairs this week.
Global risk sentiment was leaning towards positive for a good chunk of the week, arguably influenced by several factors including positive surprises from this week’s top tier global economic reports (most notably a bounce back in U.S. retail sales and the latest U.K. GDP report) and likely from the latest Brexit developments (no-deal Brexit rejected; Brexit extension supported; signs of deal still being worked on between DUP and U.K. government). We also got positive signs from the ongoing U.S.-China trade situation and the potential stimulus moves as China plans to reform its foreign investment laws and vows new tax cuts. All combined, these are likely the reasons why we saw the Aussie beat out the “safe haven” currencies (USD, JPY, and CHF).
From the counter currency perspective, the wild ride that was this week’s series of Brexit votes seems to have brought a bullish tilt to the European currencies, with the euro and Sterling beating out the other majors on the week, including the Aussie. And Canadian dollar bulls were supported this week by another strong week from oil, lifted by expectations of export cuts from Saudi Arabia and Venezuela, as well as reduced output from the U.S.
Focusing on the Aussie specifically, the economic data was arguably net weak, and we did see a sustained uniform reaction from Aussie pairs leading up to and after the weak Westpac consumer sentiment survey data, falling to its lowest levels since September 2017. And there was one more uniform downside move going into Thursday, likely a combination of falling Australian bonds yields, and possibly on the weaker-than-expected Chinese industrial production data (falling to a 17-year low) and a tick higher in the unemployment rate.
The bear run didn’t last long, though, as Aussie traders likely returned their focus to positive risk sentiment to lift Aussie pairs higher, likely sparked by the aforementioned announcements of China tax cuts and changes to foreign investment law proposals on Friday. But unfortunately it wasn’t enough to help make the Aussie a net winner on the week.