Aussie Tumbles On Concerns Over Homeowner Debt, Potential Rate Cut

The U.S. Dollar is trading flat against a basket of currencies early Thursday after back-to-back sessions of strong selling pressures. The greenback’s performance this week has been primarily driven by weaker Treasury yields in response to concerns of global growth, worries over the U.S. government shutdown and renewed issues over U.S.-China trade relations.

At 0626 GMT, March U.S. Dollar Index futures are trading 95.790, up 0.018 or +0.02%.

Investors are still reacting to news from earlier in the week regarding global growth concerns. However, U.S.-China trade tensions are probably the most dominant force driving investor sentiment at this time.

Appetite for risky assets has waned since Monday when the International Monetary Fund (IMF) cut its 2019 and 2020 global growth forecasts, citing a bigger-than-expected slowdown in China and the Euro Zone, and the failure to resolve U.S.-China trade tensions in a timely manner.

Additionally, the week began with China announcing that its official economic growth came in at 6.6 percent in 2018, the slowest pace since 1990. The number was widely expected, but it represented a noticeable decline from the revised 6.8 percent reported in 2017.

Furthermore, investors are worried about the outcome of Brexit after Prime Minister Theresa May’s divorce deal with the EU was rejected by lawmakers last week in the biggest defeat in modern British history.

Later today, traders will be focusing on the European Central Bank’s monetary policy announcement, where it is widely expected to keep policy unchanged.

News from Down Under

The Australian Dollar is trading lower on Thursday after reversing earlier gains that were fueled by mixed employment data. The selling pressure is in reaction to a major bank’s announcement of a mortgage rate hike.

At 0651 GMT, the AUD/USD is trading at .7098, down 0.0044 or -0.61%.

According to the Australian Bureau of Statistics, Australia’s unemployment rate edged slightly lower in December to a seasonally adjusted 5%, but the number of people in full-time work dropped again. Furthermore, part-time employment drove a 21,600 increase in the number of people with jobs during the month. This was better than the consensus estimate of 18,000 new jobs. However, traders were somewhat disappointed by the news of drop of 3,000 in the number of people employed full-time.

The AUD/USD retreated from its earlier highs to turn lower for the session after the National Australia Bank said it would raise mortgage rates by 12 to 16 basis points. This raised concerns over rising indebtedness at households and the economy overall, leading investors to price in the strong possibility of an interest rate cut later in the year.