Over the past seven days the Australian Dollar to US Dollar (AUD/USD) exchange rate was trending within the range of 0.7156 to 0.7320.
Since the turn of the year trader risk appetite has slumped significantly. This is mainly due to concerns regarding China’s economic slowdown, but also in response to weak global growth and low oil prices. As a risk-correlated asset, the Australian Dollar has accordingly softened versus all of its most traded currency rivals. This will be received positively by the Reserve Bank of Australia (RBA), however, as officials have been concerned about ‘Aussie’ (AUD) overvaluation for a considerable period. In contrast, the safe-haven qualities of the US Dollar has seen the ‘Greenback’ (USD) appreciate irrespective of less-than-ideal domestic data.
On Monday the rate of contraction in China’s manufacturing sector was shown to have deepened. This solidified concerns that China’s economic progress will remain tepid during 2016. The ‘Aussie’ dived in response to the Chinese data despite rising gold and iron ore prices. Exacerbating the slide was the hangover from Sunday’s Australian Performance of Manufacturing Index, which dropped from 52.5 to 51.9 in December. In addition, Australia’s Commodity Index for December declined from 75.7 to 71.2.
Meanwhile the US Dollar rallied versus its peers despite weaker-than-anticipated domestic data. Of particular disappointment was ISM Manufacturing which failed to meet with the median market forecast rise from 48.6 to 49, with the actual result dropping to 48.3 in December. Additionally, November’s monthly Construction Spending unexpectedly contracted and December’s ISM Price Paid failed to meet with the market consensus.
On Tuesday the Australian Dollar to US Dollar (AUD/USD) exchange rate declined by around -0.2% with trader risk aversion strategies continuing to dictate market movement. Australian Weekly Consumer Confidence ticked higher from 115.4 to 116.3 in the week ending January 3
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, but the data had minimal impact. US economic data on Tuesday is considered low impact in terms of market movement, so the AUD/USD exchange rate is likely to hold losses for the remainder of Tuesday’s trade.
Over the rest of the week there will be several influential economic data publications with the potential to provoke AUD/USD volatility. Australia’s AiG Performance of Service Index, Building Approvals, Trade Balance, Performance of Construction Index and Retail Sales have the potential to cause changes for the South Pacific asset. In addition, there will be a number of Chinese ecostats that will likely impact on ‘Aussie’ movement. China’s Consumer Price Index, Foreign Direct Investment, Services PMI and Composite PMI will be closely watched by those invested in the Australian Dollar.
In terms of US data: ISM Non-Manufacturing Composite, Federal Reserve Minutes, Change in Non-Farm Payrolls and Unemployment Rate will be the most significant publications this week.
The Australian Dollar to US Dollar (AUD/USD) exchange rate was trending within the range of 0.7160 to 0.7215 during Tuesday’s European session.