Last week saw the Australian Dollar to US Dollar (AUD/USD) exchange rate experience considerable movement, with the pairing fluctuating between highs of 0.7815 and lows of 0.7601. The ‘Aussie’ kicked off trading fairly positively, with the Reserve Bank of Australia (RBA) holding off from adjusting interest rates and delivering a surprisingly neutral policy statement.
A return to growth territory in the AiG Performance of Manufacturing Index also lent the Australian Dollar support, as did Chinese manufacturing figures. However, concerning trade balance data from down under swiftly put an end to the Australian Dollar’s uptrend. The Australian trade deficit was shown to have ballooned in April, with March’s 1.2 billion Australian Dollar figure more than tripling as a result of falling resource export values.
Retail Sales data for the South Pacific nation also fell short towards the end of the week, with consumer spending stagnating on the month in April rather than rising by 0.3% as expected.
Meanwhile, the US Dollar surged against the majority of its currency counterparts following the publication of the hotly-anticipated US Non-Farm Payrolls number. The Federal Reserve has frequently drawn a link between an improved domestic labour market and higher borrowing costs, so the upbeat employment figure was seen to put the prospect of a September rate increase from the Federal Reserve back on the table. The US economy had been expected to add 226,000 positions in May, but it actually gained 280,000. This, in conjunction with an unforeseen increase in Average Earnings, bolstered the ‘Greenback’ going into the weekend. As well as falling against the US Dollar, the Australian Dollar dropped to an almost six-year low against the Pound.
Over the course of this week Chinese data and Australian employment numbers are likely to be the main cause of AUD/USD exchange rate movement. China is scheduled to release Inflation, Industrial Production and Retail Sales figures. As China is Australia’s main trading partner, signs of weakness in the Asian nation’s economy may weigh on the ‘Aussie’.
Economists are forecasting that the Chinese Consumer Price Index softened from 1.5% to 1.3% in May on the year while year-on-year Retail Sales rose from 10.0% to 10.1% and Industrial Production printed at 6.0%. Meanwhile, the Australian economy is expected to have added 15,000 jobs in May following April’s -2.9% decline. If the nation adds this many positions, and the unemployment rate remains unchanged as expected, the Australian Unemployment Rate will hold at 6.2%.
Underwhelming Australian labour market data could push the AUD/USD pairing lower. Of course, US news will also have a notable impact on how the Australian Dollar performs. Should the week’s key US ecostats (including the nation’s Advance Retail Sales number) support Fed rate hike bets and keep the ‘Greenback’ bullish, the AUD/USD exchange rate may touch fresh lows.