The Australian Dollar to US Dollar exchange rate has dipped this week as investors sold the Australian Dollar from last week’s highs. However, fluctuations in risk-sentiment have kept the US Dollar from capitalising. As a result, AUD/USD has remained in the region of 0.76 throughout the week.
Australian Dollar (AUD) Supported by RBA Hawkishness
Last week, the Australian Dollar surged due to a strong Australian trade surplus report as investors wound down their Reserve Bank of Australia (RBA) easing bets.
Sure enough, this optimism was rewarded this week when the RBA took a relatively hawkish tone towards monetary policy, indicating that it had no plans to ease interest rates any further due to upside economic movement in Australia.
This, as well as news that iron ore prices have strengthened again this week, has kept AUD from falling too far as a result of profit-taking following last week’s highs.
However, the ‘Aussie’ was weakened slightly by this week’s home sales results from HIA, which showed that prices slowed considerably from 6.1% to 0.2% in December.
As a result of this and limited appetite for risk, the Australian Dollar’s Thursday recovery was subdued.
US Dollar (USD) Benefits from Fed Bets and ‘Safe Haven’ Demand
The US Dollar has been able to keep AUD/USD trending below the week’s opening levels due to increasing demand for ‘safe haven’ investments this week, as well as increased bets that the Federal Reserve will hike US interest rates soon.
Increasing concerns about the possibility of a US-China trade war under the US Trump administration has caused a drop in demand for risky, trade-correlated currencies, which has bolstered the ‘Greenback’.
Meanwhile, a hawkish statement from Philadelphia Federal Reserve President Patrick Harker has increased bets that the Fed could hike US interest rates as soon as March.
Harker indicated that a rate hike would be on the table for March, despite last week’s US Non-Farm Payroll results showing that wage growth had slowed.
AUD/USD Forecast: RBA Minutes and US Michigan Confidence Results Ahead
The Australian Dollar to US Dollar exchange rate remains relatively close to the week’s opening levels.
As a result, the pair could end the week higher if Friday’s Australian news impresses – especially if it impresses in conjunction with an increase in risk-sentiment.
Improvement in the commodity market or underwhelming US news could lead to an increase in risk-demand. If Thursday’s US jobless claims figures disappoint or Friday’s Michigan consumer sentiment slips further than predicted, the US Dollar may weaken and allow the ‘Aussie’ to end the week higher.
Over in Australia, Friday’s Asian session will see the publication of the Reserve Bank of Australia’s (RBA) latest meeting minutes results. If this contains so much as a hint that the RBA could move towards tightening monetary policy in the foreseeable future, the ‘Aussie’ will surge.
On the other hand, if the RBA minutes appear more cautious than seen earlier in the week, the ‘Aussie’ could slip and AUD/USD could end the week below its opening levels.