The Australian Dollar to US Dollar (AUD/USD) exchange rate strengthened sharply on Wednesday as eagerly anticipated jobs data out of the world’s largest economy came in below expected levels. The disappointing report caused investors to raise their bets that the Federal Reserve will not raise interest rates until the end of the year.
Earlier in the session, the Australian Dollar received support from some positive domestic and data Chinese data. According to the Australian Bureau of Statistics, retail sales increased by 0.3% in March, just below expectations for a gain of 0.4%. On a quarter-on-quarter basis, retail sales increased by 0.7% in the first three months of 2015, just below expectations for an increase of 0.9%.
Data out of China, meanwhile, added support as it showed that the nation’s services sector grew at its fastest pace this year in April, as consumer confidence and spending rallied. The PMI rose to a four-month high of 52.9 in April, up from 52.3 in March.
The main driver for the ‘Aussie’ however was the weakness of the US Dollar. Following a run of weaker than forecast data releases the ‘Greenback’ was sent falling against the majority of its most traded peers.
The ADP National Employment Report showed that US private employers created 169,000 jobs last month, the fewest since January 2014 and well below economist expectations for a figure of 200,000. In the preceding month, 175,000 jobs were created.
‘It’s disappointing, but I don’t think it’s necessarily a disaster. A gain of 169,000 is still good. In a normal situation, that would be great, but we still have a lot of slack that we need to take up from the recession,’ said an economist.
The weak report now raises the likelihood that Friday’s closely watched Non Farm Payrolls report will also come in below expectations. If that occurs, then the US Dollar will weaken substantially as economists will hike their bets that a rate hike by the Federal Reserve will not occur until later than previously expected.
Also weighing upon the US Dollar was the release of worse-than-forecast MBA Mortgage Applications data. According to the Mortgage Bankers Association, its seasonally adjusted index of mortgage application activity fell by 4.6% in the week ending on May 1. Refinancing applications also declined by 8.3%. It was the lowest level since January.
The Australian Dollar to US Dollar exchange rate was trading in the region of 0.8012.