The Australian Dollar to US Dollar (AUD/USD) exchange rate began the week at a six-year low before regaining some ground in Tuesday’s session. Looking ahead, the currency pair is expected to experience a lot of volatility due to the large number of important economic data releases.
On Monday, the ‘Aussie’ and other commodity-linked currencies came under heavy selling pressure after poor data out of China raised concerns that the global economy is slowing. The trade report showed that on a yearly basis Chinese exports tumbled by 14.6% in March, a decline that was far sharper than the 8.2% gain forecast by economists.
Chinese imports also came in below expectations as they were shown to have fallen by 12.3%. The overall monthly trade balance came in at 18.16 billion Yuan, the smallest surplus recorded in 13 months. As China is Australia’s biggest trading partner, any weak data out of the Asian nation tends to have a negative impact upon the ‘Aussie’.
The US Dollar, meanwhile, continued to find support from expectations that the Federal Reserve will raise interest rates in June, and as investors’ regained confidence that the US economy will continue to recover following the release of several disappointing data releases.
On Tuesday morning the Australian Dollar rallied by more than 0.70% after domestic data showed that business sentiment and conditions improved in March. According to the National Australia Bank (NAB), its business survey improved by 3 index points and conditions saw a 4-point rise, to achieve a total of 6. The data also showed that there was a small rise in employment. The cause of the better than expected data was the Reserve Bank of Australia’s (RBA) interest rate cut filtering into the housing and non-mining sectors.
As the session progressed, the Australian Dollar made further gains against the US Dollar. The American currency was weakened by the release of softer-than-forecast retail sales data. The report showed that sales increased by 0.9% last month, below expectations for an increase of 1%. The report dampened optimism over the strength of the US economy and the timing of an interest rate hike.
Also weakening the ‘Greenback’ was the latest International Monetary Fund Global Growth Forecast. The IMF cut its forecast for US GDP growth in 2015 to 3.1%, from the 3.6% predicted in January.
Looking ahead to the rest of the week the AUD/USD exchange rate will be affected by Wednesday’s Australian consumer confidence and US industrial production data. Also of interest will be Thursday’s Australian employment data and Friday’s US inflation report.