Dollar in Demand, Australian GDP Next

The US dollar pressed to fresh (and nearly fresh) cycle highs on Tuesday as US stocks and yields climbed. The dollar gained at least 0.5% right across the board while the Swiss franc lagged. The Aussie fell after the RBA bounce and is vulnerable with GDP next.

All else being equal, the US dollar climbs. That's been the story day after day for the past four months and although there weren't any fresh reasons to buy on Tuesday, the dollar climbed.

Fedspeak from a variety of sources was benign or even bland. Perhaps the most notable headline was Vice-Chair Fischer saying the Fed should keep rates near zero if inflation heads lower.

Data was solid with US vehicle says rising to a 17.2m pace in Nov compared to 16.8m expected but that's not generally a market driver.

The commodity currencies came under pressure with oil falling $1.67 and gold down $13 in a retracement of Monday's super-sized gains. Despite some impressive reversal patterns to start the week/month, there was no follow-thru.

One driver of USD strength is the Treasury market. Ten-year yields pushed up to 2.29% from as low as 2.16% Monday. There is talk of rate-lock selling as companies finalize plans for capital raising at low rates.

USD/JPY hit a fresh 7-year high of 119.29. Technically, there isn't much standing in the way of 120.00 but the market was hesitant to press. But not that it was also hesitant to back off and that's a bullish signal. We issued 2 new Premium trades ahead of this week's ECB meeting and the subsequent week's SNB announcement. Existing USDJPY longs are over 90 pips in the money. All details are found in the Premium Insights.

Looking ahead, the Australian dollar will be the major focus, especially with Friday's cycle low of 0.8414 nearby. The main event is at 0030 GMT when Q3 GDP will be released and is expected up 0.7% q/q. Two internal numbers to watch are government spending and exports (for a sense of the AUD boost).

Thirty minutes later, the China non-manufacturing PMI will be released. It was at 53.8 and although the impact is smaller than the manufacturing data, a soft reading could spark fresh China worries and weigh on AUD.