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AUDUSD hits three-month highs on massive trade surplus; US jobs tonight

The Australian dollar roared higher yesterday after a massive jump in the Australian trade position.

The December trade surplus was AUD3.5 billion, the largest result on record and a significant turnaround from the two-year run of trade deficits seen as recently as two months ago.

The trade result was mainly thanks to higher iron ore and coking coal prices. The result is expected to have a positive impact on Australian economic growth figures when they are released next month.

The AUDUSD jumped more than 1.0% to finish at the highest level since 8 November 2016.

AUDEUR nears two-year highs

The Aussie climbed sharply higher against all major currencies.

In Europe the AUD was higher, with the local currency up 1.1% versus the euro. The AUDEUR closed at the highest level since May 2015.

The AUDGBP was the best performing pair as it jumped 2.0%. The pound was weaker after Bank of England governor Mark Carney indicated there remains slack in the UK economy that might require further rate cuts.

The AUDNZD jumped 0.9% after Wednesday’s disappointing employment numbers saw the NZD continue to be sold.

Key data

Two major economic releases can drive the Aussie today.

From China, the closely-watched Caixin manufacturing activity index is due at 12.45pm. With Chinese growth recently improving, further signs of growth can boost the AUD.

From the US, tonight’s non-farm payrolls number will be key. The market expects 175k new jobs.

US job numbers have recently missed expectations as the low unemployment rate – at 4.7% – makes further growth hard work.

For more information on upcoming releases, please download our February Risk Events Calendar.

By Steven Dooley -- Currency Strategist (APAC)

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