After recovering yesterdays post-jobs data losses early in U.S trade, the Aussie dollar was once again on the back-foot overnight coinciding with broad weakness from US equities, with a risk-off market demeanor creating general greenback support.
In a speech overnight, Fed Chairman Ben Bernanke failed to shed any light on the Fed's likely course of action when the bank reconvenes for a special 2-day meeting on Sept 20. Bernanke stopped short of announcing any specific measures to resurrect growth in the U.S, but assured markets the Fed still has the tools if necessary. The baton will now be handed to President Obama who is expected to unveil a grand job creation plan said to be worth $US300 billion at 0900 AEST.
As anticipated, both the Bank of England and the European Central bank kept benchmark interest rates on hold overnight at 0.5 and 1.5 percent respectively. With the BoE making no change to existing quantitative easing measures, sterling rallied against major rivals in the ensuing period - however the true reaction will only be felt upon the release of the minutes later this month, which will provide further insight onto the likelihood of further asset purchases.
The big moves of the session came from the Euro which has finally made a convincing break to the downside of $US1.40. In his post decision address, ECB President Jean Claude Trichet took a dovish turn stating euro area economy to grow moderately, subject to particularly high uncertainty and intensified downside risks. Gone was the vigilance on inflation that has held the Euro high in times of extreme uncertainty. The Euro has maintain this downward trajectory through the US trade with EURUSD currently remaining near to 2-month lows of $US1.3872.
The local day will see the focus turn to China with the release consumer prices data expected at 1200 AEST. Inflationary forces are expected to have moderated in August to a yearly pace of 6.2 percent - previously 6.5% percent. Also on the docket is data on industrial production, PPI, retail sales and fixed asset investment. Should the CPI come in stronger than forecast, we're likely to this manifest negatively on the Aussie dollar as participants envisage further tightening measures in an effort to combat inflation.
Intra-day support can be seen around 105.65 US cents with any significant fall in the local session likely to be contained around 104.8 US cents. The immediate focus for traders will be Obama's speech coming up shortly. At the time of writing the Aussie dollar is buying 105.9 US cents.