Solid gains for Aussie pairs on counter currency weakness, and a slight rebound in global risk sentiment at the end of the week.
Australia Headlines and Economic data
- The Conference Board Leading Economic Index (LEI) for Australia increased 0.3% in January 2019 to 106.4
- Austrlia private sector credit increase by +0.3% in February vs. +0.2% in January 2019
- Australia’s central bank confident on jobs data, eyes tax take
- RBA’s Ellis Says Weak Household Income Explains Jobs-GDP Puzzle
Major Market Drivers for the Australia
We saw broad early strength in Aussie pairs this week despite the risk-off mood carrying over from last week after signals from the bond market of a possible recession ahead and the weak European PMI data. This bullish behavior could stem from positive comments from Reserve Bank of Australia’s Assistant Governor Luci Ellis on the domestic jobs sector, citing the falling unemployment rate to an eight year low of 4.9% and the rise in total employment by 2 percent during a speech on Tuesday.
The rally could have also been supported by a rebound in global risk sentiment after German confidence data bounced on Monday, the Aussie could have tracked gold higher, or maybe it just looked like the best currency against all the negative news in the other majors (e.g., the Brexit drama, dovish shift by central banks). What ever the case may be for the broad rally, Aussie pairs finally met sellers on Wednesday, possibly on Chinese data that showed China’s industrial profits shrank the most since late 2011. If this was the main catalyst, it was enough to take most Aussie pairs back to the around the week’s opening prices by the end of Wednesday’s U.S. trading session.
From that point on, it was basically all about counter currency events as Australia’s economic calendar failed to give traders top tier data points, or barely anything at all. With the lack of Australia specific market movers, it looks like the Aussie benefited once again from negative news from other currencies (e.g., Brexit deal rejected again, weak rebound in Japanese factory output, dovish Fed comments), and arguably the fall in bond yields helped push traders to relatively higher-yielding assets like the Aussie.
Global risk sentiment seemed to have improved at the end of the week, possibly from positive reports on the U.S.-China trade negotiation story, a scenario that continues to support the Aussie as China is its largest trading partner. So any positive outcome from that situation will likely benefit Australia as well.