The Australian Dollar has kept to its winning streak against the US Dollar so far this week, despite the handicap of not having much domestic data to rely on.
The US Dollar has continued to fluctuate overall, though future advances could well be in store given the current odds assigned to a December Fed interest rate hike.
Last week’s AUD to USD movement saw a marginal net gain for the Australian Dollar, which rose from a starting low of 0.75 to a high of 0.77 before dipping slightly before the weekend.
Australian Dollar Strength Sourced from High Chinese Resource Demand
AUD gains have been inspired by commodity-related news.
Iron ore imported from countries like Australia is used to produce Chinese steel, and since Chinese demand has consistently increased over the past few weeks, the cost of the commodity has been at its highest level since the start of September.
This has boosted the Australian Dollar’s appeal considerably, as has the news that Chinese coal shortages are raising the price of the fuel source when exported from Australia.
The latest direct Australian news has been that inflation rates in Q3 have risen above predicted figures, to 0.7% on the quarter and to 1.3% on the year.
Fluctuating Odds of 2016 US Rate Hike Continue to Unsettle US Dollar Exchange Rates
The week for the US Dollar has been a mixed one on the whole. The US currency has repeatedly been alternately pushed into high and low demand, mainly due to the constantly changing chances that the Fed will implement a December interest rate hike this year.
While Monday brought a mix of hawkish and dovish Fed speeches, the manufacturing PMI flash for October raised confidence by climbing from 51.5 to 53.2.
A similar situation occurred on Tuesday, when in spite of the CB consumer confidence index falling, IBD/TIPP economic optimism for November rose above forecasts.
The latest US ecostats have focused on October’s composite and services flashes, which have risen above forecasts, yet other data has shown a sharp drop in mortgage applications and an unexpected decline in stocks of crude oil and gasoline.
Evidence of the uncertainty generated by these results were the odds of a December Fed rate hike, which started in the area of 70% on Monday, rose to 72% on Wednesday morning then fell to 67.5% by Wednesday afternoon.
AUD/USD Forecast
For the rest of this week and the next, Australian Dollar/US Dollar exchange rate movement may occur as a result of Tuesday’s Reserve Bank of Australia (RBA) interest rate decision and next Thursday’s balance of trade figures for September.
US data includes September’s durable goods orders, while Friday’s major news will cover Q3’s GDP growth rate.
The RBA is expected to leave interest rates at 1.5%, while the current Australian trade deficit has a possibly damaging expansion on the cards.
With the US results, orders are set to rise on the month, while the ‘Buck’ could well rally if Friday’s forecast of a GDP jump from 1.4% to 2.5% proves accurate.