The Australian Dollar to US Dollar (AUD/USD) exchange rate experienced a bit of a reversal of fortunes on Wednesday as comparatively positive Chinese data boosted the ‘Aussie’ and the US Dollar came under pressure as a result of below-forecast domestic ecostats.
The AUD/USD exchange rate began the week trading in the region of 0.7881 but steadily dropped to 0.7595 as a number of factors reduced demand for the South Pacific asset.
As well as coming under pressure as a result of Federal Reserve rate hike and Reserve Bank of Australia (RBA) rate cut projections, falling iron ore prices and dampened risk sentiment drove the commodity-driven currency lower.
The Australian Dollar fell below the 76 US cent level on Monday as US core Personal Consumption Expenditure increased unexpectedly and the currency only managed to stage a modest rebound on Tuesday after the sub-50 Chicago Purchasing Managers index caused a widespread softening of the ‘Greenback’.
However, during the Australasian session a slight uptick in the AiG Performance of Manufacturing Index and China’s unexpectedly upbeat Manufacturing PMI lent the Australian Dollar support.
Further gains were recorded during the North American session as hopes for a robust US Non-Farm Payrolls report on Friday were dashed following the release of a less-than-impressive ADP Employment Change number.
The ecostat had been projected to show an employment increase of 225K in March, following the 212K positions added in February.
However, the US economy was only shown to have added 189K positions.
This indicates that the highly-influential NFP stat will disappoint, and if that proves to be the case it could push back Federal Reserve interest rate hike expectations.
The disappointing result was followed by the news that the ISM Manufacturing PMI dipped from 52.9 to 51.5, below the forecast reading of 52.5. The Markit Manufacturing PMI showed unexpected improvement, but as the ISM measure carries more weight, the US Dollar broadly declined in response to the reports.
The Australian Dollar to US Dollar currency pair briefly advanced to a high of 0.7664 before returning to trade in the region of 0.7620.
Before the weekend additional AUD/USD movement could be caused by Australia’s trade balance report, US Factory Orders/Initial Jobless/Continuing Claims/trade balance figures and China’s HSBC Services/Composite PMI.
Even if the US reports bomb, it would take impressive Chinese data or a marked increase in iron ore prices for the Australian Dollar to post considerable gains ahead of April’s Reserve Bank of Australia (RBA) policy meeting.