EBC Markets Briefing | Aussie dollar at stake in Trump’s inauguration

The Australian dollar steadied on Monday before Trump’s inauguration. Biden’s administration made a global push to constrain China in the past four years and decoupling will only accelerate going forward.

Option trading volume on the Australian dollar versus the greenback on Wednesday surged to the highest in three weeks with increasing bears, according to data from The Depository Trust & Clearing Corp.

Despite the threat of it breaching the 2022 low, the premium to hedge the currency’s downside over the next three months, compared to its upside, remains well below levels from August or October.

Australia’s consumer confidence edged down in January on concerns about the broader economy, including a weaker currency and uncertainty about the timing of interest-rate cuts.

But employment sped past forecasts in December although the jobless rate ticked higher as many more people went looking for work. Slowing wage growth suggests the labour market is not a source of inflationary pressures.

Swaps still imply a 68% probability that the RBA, which has held its policy steady for a year, will cut rates on 18 February, following the quarterly inflation report and another reading on retail sales.

Commonwealth Bank strategist said the Aussie dollar could test resistance at $0.6322 if Trump's policy changes fall short of market expectations. We see more pains ahead as the downtrend remains intact.

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