The Australian Dollar is bullish on hopes that Beijing will act to boost the Chinese economy, while the US is soft despite rising consumer confidence.
AUD/USD Bullish on Hopes of Additional Stimulus Measures from Beijing
The Australian Dollar is currently making strong gains against most of the major currencies, including gains of 0.2% against the New Zealand Dollar (NZD), 0.4% against Pound Sterling (GBP), 1% against the US Dollar (USD) and the Chinese Yuan (CNY) and 1.1% against the Euro (EUR).
With the Chinese New Year holiday approaching, investors are anticipating that Beijing will have to announce additional stimulus measures before the markets and banks close for the holiday period if they intend to loosen monetary policy. The potential for a boost to the Chinese economy has helped the ‘Aussie’ to appreciate.
While survey data yesterday showed a fall in business optimism and a less positive assessment of the current situation, according to survey compilers National Australia Bank (NAB) the results are still positive. Both the Business Conditions and Business Confidence indexes dropped, yet remained above the survey average levels. The figures suggest that, while the Chinese economy is weighing heavily on the minds of business owners in Australia, confidence remains high.
The Australian Dollar to US Dollar (AUD/USD) exchange rate is currently trading around 0.7003.
US Dollar to Australian Dollar (USD/AUD) Soft Despite Rising Consumer Confidence
The US has released a glut of data today, with the figures decidedly mixed. The headline release, however, has proved much more positive than expected. Consumer Confidence rose in January, pushing the index up from 96.3, past the forecast 96.5 to 98.1. House prices also posted a steady rate of growth.
Markit PMIs didn’t perform so well, with the Services index dropping past the predicted 54 mark to 53.7 and the Composite slipping from 54 to 53.7.
Regarding the Services PMI, Markit Chief Economist Chris Williamson has said that, ‘A struggling manufacturing economy is being accompanied by a services sector where growth showed further signs of losing momentum in January even before the bad weather hit. The data are by no means disastrous, signalling a 1.5% annualised rate of economic growth at the start of the year, but the drop in business confidence to one of its lowest levels for over five years suggests that firms are bracing themselves for worse to come.’
The US Dollar to Australian Dollar (USD/AUD) exchange rate is currently trading between 1.4270 and 1.4448.
Australian Dollar to US Dollar (AUD/USD) Exchange Rate Forecast: Fed Rate Decision Ahead
Australian inflation data is due to be released during tomorrow’s Australasian session and is expected to show that consumer prices increased 1.6% year-on-year (YoY) in the fourth quarter of 2015. An increase will be positive for the Australian Dollar, but the US Federal Open Market Committee’s (FOMC) interest rate decision later in the day could steal focus.
The Australian Dollar to US Dollar (AUD/USD) exchange rate is currently trending between 0.6914 and 0.7006.