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Aussie inches up ahead of China data, kiwi falls on current acco

6/14/2017, 10:40:33 AMBasics of Trading
Aussie inches up ahead of China data, kiwi falls on current acco

The Aussie inched higher in Asia on Wednesday ahead of key data sets from top trade partner China and as investors await the language from the latest Fed policy review later in the day.

AUD/USD traded at 0.7538, up 0.01%, while USD/JPY changed hands at 110.07, up 0.02%.

In Asia, China reports industrial production for May with a gain of 6.3% seen on year, along with fixed-asset investment expected to post a 8.8% gain and retail sales seen up 10.6%.

New Zealand reported its current account for the first quarter saw a deficit of NZ$8.13 billion, wider than the deficit of NZ$7.28 billion seen and from NZ$7.11 billion a year ago, and crossing 3% of GDP. NZD/USD traded at 0.7212, down 0.12%.

The U.S. dollar index, which measures the greenback’s strength against a trade-weighted basket of six major currencies,rose 0.02% to 96.99.

Overnight, the greenback dropped to a two-month low against the Canadian dollar on Tuesday, following a surge in demand for the loonie, after a senior central bank official suggested that Canadian interest rates are poised to rise.

Carolyn Wilkins, senior deputy governor at the Bank of Canada (BoC) said in a speech on Monday that policymakers would need to reevaluate whether interest rates need to be kept at current low levels as the country’s economy continues to strengthen after adjusting to the fallout from the collapse in global crude prices.

Following Wilkins comments, expectations for an interest rate hike in 2017 soared to 72%, as the majority of market participants were expecting the BoC to raise rates in 2018 given that it was only a few months ago the central bank said that rate cuts remained an option.

The move higher in the loonie was mirrored by a similar move in sterling, which recovered lost ground against the dollar, buoyed by data showing that UK inflation moved near to a four-year high.

GBP/USD rose after the latest UK inflation rate hit its highest level since June 2013, rising to 2.9% from 2.7% April, well above the Bank of England’s 2% target.

The sharp move higher in sterling and the loonie dented the dollar’s strength against a basket of currencies ahead of the start of the Federal Reserve’s June meeting, which concludes on Wednesday, with the majority of traders expecting an interest rate hike.

Traders are expected to closely monitor the press conference from Fed chair Janet Yellen, following the Fed’s interest rate decision, for any clues about future monetary policy as well as details about the central bank’s plan to trim its $4.5 trillion balance sheet.