Australian Dollar movement has been undeniably positive today as a theory regarding the People’s Bank of China (PBoC) increased confidence in the economic stability of Australia’s biggest trading partner.
For the week so far, the ‘Aussie’ has risen from a starting low of 0.7402 to 0.7492 against the US Dollar.
Mixed Results So Far This Week for Australian Data
While it has won out against the ‘Buck’ so far today, the Australian Dollar’s uptrend has been marred by domestic issues.
Sunday brought a falling AiG performance of construction index for February, while Monday’s ANZ job advertisements, foreign reserves and manpower survey all fell as well.
The end of Monday marked a turning point for the fortunes of the ‘Aussie’, however, in the form of a speech from Reserve Bank of Australia (RBA) Deputy Governor Philip Lowe. The policymaker’s statement was essentially that while it still had quite a way to go, the Australian economy appeared to be on the mend and would likely be on course for slow but steady growth in 2016.
This was helped along by a ‘surprising’ spike in the price of iron ore, which occurred yesterday.
Potential for More Chinese Intervention Amplifies Investor Confidence
The cause of the current ‘Aussie’ uptrend may be linked closely to China’s economy; yesterday, imports, exports and the trade surplus all fell noticeably, which sparked major investor concern over China’s economic stability in the short and long term.
Today, however, Daiwa Capital Markets have speculated that the PBoC is using covert intervention measures to prop up the economy, as just the latest in its long chain of measures designed to bring stability and confidence to the troubled market. This has boosted investor opinion of China’s economy considerably and by extension, raised the value of the Australian and New Zealand Dollars.
US Dollar Fluctuates This Week on Uncertain Economic Announcements
Investor interest in the US Dollar has been limited so far this week, as economic data has failed to push the currency either up or down to a significant degree.
Monday brought speeches from Fed Vice Chair Stanley Fischer and Governing Board Member Lael Brainard. Fischer was tentatively optimistic with regards to inflation increasing, while Brainard was decidedly more dovish in her overall outlook.
Yesterday, the NFIB small business optimism result disappointed investors by falling from a prior 93.9 points to 92.9.
Today, the US Dollar has mainly been low on account of severe uncertainty over when and by how much the Fed will hike the US interest rate.
This Week’s AUD/USD Exchange Rate Forecast
For the remained of the present week, Australian Dollar/US Dollar exchange rate movement may occur as a result of this afternoon’s US wholesale inventories figure for January, tomorrow morning’s Australian consumer inflation expectation for March and the Chinese CPI on the year in February.
At the time of writing, expectations were for a supportive drop in the inventories result from -0.1% to -0.2%, while a reprint at 1.8% was on the cards for Chinese inflation.
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