AUD/USD Exchange Rate: Australian Dollar Down as Growth Data Falls Short

Tax Reform Speculation Boosts US Dollar Exchange Rate vs Australian Dollar

The Australian Dollar to US Dollar (AUD/USD) exchange rate tumbled on Tuesday evening as the US Dollar was supported by US tax reform hopes.

During Wednesday’s Asian session the ‘Aussie’ was pushed lower still by some disappointing Australian growth data.

The interbank AUD USD exchange rate began the week around 0.7618 and briefly touched a three-week-high of 0.7653 on Tuesday. The pair has since slumped and now trends in the region of 0.75.

Australian Dollar Sold on Disappointing Australian Growth Stats

Investors had been hoping that Australia’s economic performance would become strong enough to encourage the Reserve Bank of Australia (RBA) to take a more hawkish outlook on monetary policy, despite poor wage growth and inflation.

However, recent Australian ecostats have indicated that Australia’s economic growth has not been as strong as expected, and this has weighed heavily on Australian Dollar (AUD) exchange rates.

Wednesday’s Asian session saw the publication of Australia’s Q3 Gross Domestic Product (GDP) results.

Quarter on quarter growth was forecast to slip from 0.8% to 0.7%, but instead dropped from a revised 0.9% to 0.6%.

The yearly growth figure also disappointed, only rising to 2.8% and missing predictions that it would jump to 3%. The previous figure was revised slightly higher from 1.8% to 1.9%.

Analysts noted that the consumer spending part of the growth figure came in at just 0.1% on the quarter, the weakest figure since 2008.

This indicated that consumer activity may be slowing due to underwhelming wage growth.

US Dollar Investors Anticipate Tax Progress

The AUD/USD exchange rate was pushed lower still as US tax reform speculation lifted the US Dollar.

The US Republican Party’s tax proposals have overcome major obstacles over the last week.

Markets are increasingly optimistic that major parts of the plans will successfully pass through Congress, possibly even by the end of the year.

However, the AUD USD exchange rate could have declined even further if not for some underwhelming US data and political uncertainty surrounding the Trump-Russia story.

Tuesday’s American session saw the publication of November’s final US non-manufacturing PMIs, from both Markit and ISM.

Markit’s services and composite PMIs fell short of projections, both coming in at just 54.5.

Meanwhile, ISM’s non-manufacturing PMI was forecast to slip from 60.1 to 59.0, but instead slipped to 57.4.

October’s US trade deficit update was disappointing too, worsening from US$-44.9b to US$-48.7b.

AUD USD Exchange Rate Forecast: Australian Trade and US NFP Stats Ahead

The Australian Dollar to US Dollar exchange rate could be influenced by notable datasets due in the coming days, but investors are likely to keep a close eye on US political news too.

Any developments on US tax proposals could boost US Dollar demand, especially if it appears more likely that the bill will succeed in Congress.

On the other hand, the US Dollar could weaken if the investigation into the Trump 2016 campaign turns up new evidence.

As for economic data, Thursday will see the publication of Australia’s November construction PMI and October trade balance results, as well as a bulletin from the Reserve Bank of Australia (RBA).

Over in the US, Thursday will see the publication of the latest US jobless claims data, followed on Friday by November’s highly anticipated US Non-Farm Payroll results.

If US job market data continues to impress, US Dollar investors will be more confident that the Federal Reserve will maintain a relatively hawkish outlook in 2018.

Luke Trevail

Luke studied Journalism at university but quickly moved into the financial sector, initially working in retail banking before joining TorFX in 2007. As a Senior Account Manager Luke assists in overseeing the management of the company’s exposure to currency volatility. He uses his years of foreign exchange experience to produce regular news updates exploring the latest currency movements.

Contact Luke Trevail