Despite briefly surging on Wednesday and Thursday due to poor US figures and strong Australian employment data, the Australian Dollar to US Dollar exchange rate slipped on Thursday as this week’s Federal Reserve news bolstered ‘Greenback’ demand. AUD/USD still remains above the week’s opening levels of 0.7534 and trended at around 0.7580 on Thursday.
Australian Dollar (AUD) Slips Despite Strong Australian Job Stats
The Australian Dollar surged during Thursday’s Asian session following the publication of Australia’s key May employment report.
Australia’s job market performed far better than expected in May. The employment change came in at 42k, beating expectations of a modest 10k increase. The previous figure was revised higher from 37.4k.
The full-time employment change was also impressive, improving by 52.1k, while the previous figure was revised higher from -11.6k to -5.7k.
Australia’s unemployment rate was projected to remain at 5.7% in May but instead improved to 5.5%. This was despite the nation’s participation rate unexpectedly rising from 64.8% to 64.9%.
Despite this, stronger demand for the US Dollar towards the end of the week has kept the Australian Dollar to US Dollar exchange rate from holding its best levels.
US Dollar (USD) Benefits from Optimistic Federal Reserve
Meanwhile, demand for the US Dollar improved as investors reacted to the Federal Reserve’s latest policy decision.
As investors and analysts expected, Wednesday saw the Fed hike US interest rates for the second time this year. The Federal Reserve also indicated that despite a drop in US inflation it still planned to hike US interest rates one more time before the end of the year.
However, the Fed did take notice of slowing inflation and cut its 2017 inflation forecast. The Fed no longer expects US inflation to remain around 2% throughout the year.
News that US inflation had slowed further than expected concerned investors and weakened the US Dollar before the Fed’s meeting on Wednesday.
While the Fed remains generally optimistic, analysts and investors are still not confident that another US interest rate hike is on the way this year. According to the CME Fedwatch tool, bets of a third US rate hike in 2017 are only at around 35%.
AUD/USD Forecast: US Consumer Confidence Data Ahead
This week’s influential Australian data has all come in, meaning the US Dollar and risk-sentiment are likely to drive AUD/USD exchange rate movement until the end of the week.
Friday’s US data includes Michigan’s June consumer sentiment survey, as well as building permit and housing start data from May.
Investors expect consumer confidence to have slipped slightly in June from 97.1 to around 97. If confidence beats expectations the US Dollar is likely to strengthen and could push AUD/USD closer towards the week’s opening levels.
However, unless there’s a big increase in demand for ‘safe haven’ currencies like the US Dollar, the Australian Dollar to US Dollar is unlikely to fall far and is on track to sustain some gains this week.
Next week’s Australian news includes the publication of the Reserve Bank of Australia’s (RBA) latest meeting minutes.
Meanwhile, US Dollar traders will be focused on US existing home sales, new home sales, jobless claims and of course any fresh political developments next week.