Last week saw some substantial movement for the Australian Dollar to US Dollar exchange rate as a result of the Federal Open Market Committee (FOMC) Rate Decision, with members opting to leave US interest rates at their current level. A worse-than-forecast US GDP report and Employment Cost Index also influenced trading. After the latter prompted the AUD/USD pairing to rise to a then-weekly high of 0.7352 the rate ultimately levelled off at 0.7300 going into the weekend.
The Australian Manufacturing PMI posted significantly higher than anticipated in the early hours of Monday, at 50.4 rather than 45.8, to demonstrate marked improvement over the previous month as well as a return to positive growth. Although it may only be narrowly above the index’s neutral baseline of 50, the fact remains that the sector is now undeniably above it. In spite of this the AUD/USD exchange rate soon dipped.
Later in the day the US released its year-on-year Personal Consumption Expenditure index numbers for June. Equalling the 1.3% increase of the previous month, the figure exceeded expectations to demonstrate a definite healthy economic trend. However, this was swiftly overshadowed by the country’s Manufacturing PMI decreasing from 53.5 to 52.7. As the margin of growth clearly narrows the economic well-being of the US has been called into question.
Tuesday was a very positive day for the ‘Aussie’ as it was prompted into large gains against the majors by a combination of unexpectedly positive domestic Retail Sales and the lack of cuts announced in the Reserve Bank of Australia (RBA) Rate Decision. Buoyed by the news the AUD/USD exchange rate shoot up to peak at a fortnightly-high of 0.7427.
Australia’s Services PMI also came in well this morning to continue the bullish run for the Australian Dollar. Rather than shrinking under the threshold of growth, the index reported a significant increase to 54.1 from 51.2. Even so, the anticipation of fresh US data spurred investors to favour the ‘Buck’ over the commodity currency, despite its recent recovery.
US Employment Change and Balance of Trade did not emerge in the favour of the ‘Greenback’ today, however. Undoing the work of earlier statements from Fed officials that a rate hike could be imminent in September, these discouraging figures naturally prompted a drop in US Dollar value. A rally was soon in store, though, as the final US PMIs were released alongside the Non-Manufacturing PMI. All posted positively, with the Non-Manufacturing PMI seeing a marked advancement on the previous month to reach 60.3 and its highest level since 2005. As a result the AUD/USD exchange rate slumped to 0.7355.
Further movement is likely for the ADU/USD pairing in the latter half of the week, with Employment Change due from Australia and Unemployment Rate numbers scheduled for release from both nations. Jobless Claims data from the States and the Australian Home Loans figures will also be published. All of this could add up to major gains for either currency, depending on the strength of results. Should Australia continue its positive coup the ‘Aussie’ may well see consolidation of the gains made in the first half of this week. Continuing weakness for US reports would also bode badly for the possibility of a ‘Buck’ rally and the chances of a September interest rate hike.