AUD Briefly Breaks Above US$0.80

In the current low volatility environment, the 1.25% gain in the Dow Jones overnight was a relatively large one-day move. The index opened higher and then trended up for the rest of the session while the S&P 500 finished up 0.95%. The rally pushed the Dow above 26,000 for the first time and puts the trailing 12-month gain for the index at 32%.

The AUD has continued to climb and is now just below US$0.80 after briefly trading above that level overnight. This apparent strength, however, is largely a function of a weaker US dollar. The US dollar index is down 4.3% from is level on November 1 despite the prospect of higher rates that would normally be good for the currency. Traders may be anticipating that we are already closer to the end of the rate hiking cycle than the beginning and hence are selling the US dollar and buying gold. Although gold had an 0.6% fall overnight, it is still up 7% since the December rate hike.

The rout in cryptocurrencies halted overnight as the bitcoin price bounced after briefly trading below US$10,000. Historically, bitcoin has always bounced from these sell-offs however it is clear that the pace of the upward movement cannot continue forever. For now, bitcoin is back up at US$11,460.

Today Australia will release its employment data for the month of December. November's number was much higher than expected with 61,000 new jobs created but expectations for December are a much more modest 13,200 increase. The unemployment rate is expected to remain steady at 5.4%.

Data Releases:

–    Australia Employment Change & Unemployment Rate 11:30am AEDT

–    China GDP & Industrial Production 6:00pm AEDT

To view the Rivkin economic calendar and Local Markets matrix, members can click here.

This article was written by William O'Loughlin – Investment Analyst, Rivkin Securities Pty Ltd. Enquiries can be made via william.oloughlin@rivkin.com.au or by phoning +612 8302 3633.