Market sentiment has been the driving force of currency market movement since the turn of the year, but will this continue to drive the AUD/USD exchange rate over the coming seven days?
AUD/USD Exchange Rate Softened Despite Trader Risk Appetite
Over the past seven days the Australian Dollar to US Dollar (AUD/USD) exchange rate was trending within the range of 0.70658 to 0.7184.
On Thursday the Australian Dollar softened versus its major peers despite trader risk-appetite improving. High-yield demand increased in response to the news that Chinese inflation missed estimates. This led many analysts to predict that the People’s Bank of China (PBoC) will continue to employ stimulus measures. However, the ‘Aussie’ (AUD) failed to capitalise after domestic data produced less-than-ideal results. Of particular disappointment was the Unemployment Rate, which unexpectedly rose from 5.8% to 6.0% in January.
Meanwhile, the US Dollar edged higher versus a number of its major peers despite reduced demand for safe-haven assets. The appreciation can be linked to positive domestic labour market data which showed Initial Jobless Claims exceeded expectations. Having forecast a rise of new benefits claimants in the week ending February 13
th
, from 269,000 to 275,000, the actual results surprised investors by falling to 262,000.
Will Market Sentiment Continue to Dominate AUD/USD Movement?
Given that global equities have been hugely volatile since the turn of the year, crude oil prices have seen significant price swings, many central banks are adopting negative interest rates, and geopolitical uncertainty is rife; there is a high chance that market sentiment will remain the principle driver of movement for a considerable period to come. Despite this there will be several domestic data releases with the potential to cause AUD/USD changes.
For those invested in the Australian Dollar, data will be less impactful given the complete absence of influential, market moving reports due for publications. Even important Chinese ecostats will be lacking over the coming week. For those trading with the US Dollar, however, the picture is very different. Consumer Confidence, Durable Goods Orders, Advance Goods Trade Balance, Annualised Gross Domestic Product, Gross Domestic Product Price Index and Core Personal Consumption Expenditure should all impact USD movement.
Any speeches from Federal Reserve officials may also impact the AUD/USD exchange rate. Uncertainty regarding the Fed’s policy outlook has weighed heavily on USD demand of late, with many traders speculating that the central bank could cut the recently hike overnight cash rate in the face of tepid global economic conditions.