Australian Dollar to US Dollar Exchange Rate Forecast: AUD/USD Could Hold Gains Despite Hawkish Fed

Australian Dollar to US Dollar Exchange Rate Steady despite Fed Rate Hike Bets

Wednesday saw the publication of the latest Federal Reserve meeting minutes report, but the Australian Dollar to US Dollar (AUD/USD) exchange rate has remained strong despite the report’s detailing of Fed hawkishness.

AUD/USD movement has been highly mixed in recent weeks, due to widespread trade uncertainties.

This week though, a resurgent Australian Dollar (AUD) has helped AUD/USD to climb from the interbank level of 0.76 to trade near a multi-week high of 0.77. The pair has gained almost a cent.

The Federal Reserve’s latest meeting minutes indicated that all of the Fed’s policymakers agreed that US growth and inflation was likely to be higher. The report indicated that the Fed was eyeing a more aggressive path of US interest rate hikes.

However, while Fed interest rate hike bets rose following the report, the US Dollar (USD) was unable to hold its ground against a resilient ‘Aussie’.

Australian Dollar (AUD) Exchange Rates Supported by Commodity News

A spike in the price of oil has supported risky trade-correlated currencies this week, despite market concerns about geopolitical tensions in the Middle-East.

While geopolitical tensions have made investors hesitant to buy risky currencies like the Australian Dollar too much, the currency has still benefitted from the stronger commodity price news.

The Australian Dollar’s resilience has been partially due to the currency nearing key support levels amid recent losses.

However, its gains have also been limited due to underwhelming Australian ecostats this week.

On Thursday, Australia’s April consumer inflation expectations figure slipped from 3.7% to 3.6%, causing concern that Australia’s inflation rate would not support any tighter monetary policy from the Reserve Bank of Australia (RBA) any time soon.

It followed underwhelming Australian business and consumer confidence survey stats earlier in the week.

US Dollar (USD) Exchange Rate Strength Limited by Mixed US Ecostats

The Federal Reserve’s latest meeting minutes were more hawkish than expected, but some investors doubted that recent US data matched the bank’s apparent optimism.

Wednesday’s US Consumer Price Index (CPI) data from March largely met expectations, except in the month-on-month print where it unexpectedly contracted at -0.1% rather than coming in at the forecast 0%.

Yearly inflation improved slightly from 2.2% to 2.4% as forecast, while the core inflation rate improved from 1.8% to 2.1% as forecast. Core inflation rising as forecast largely offset concerns about the dip in monthly inflation.

Last week’s disappointing US Non-Farm Payroll report, as well as geopolitical tensions between the US and Russia, also continue to weigh on US Dollar demand.

Australian Dollar to US Dollar (AUD/USD) Forecast: US Consumer Sentiment Ahead

As the Australian Dollar to US Dollar (AUD/USD) exchange rate has gained around a cent so far this week despite the Federal Reserve’s notably more hawkish tone, the pair is unlikely to shed many of its gains by the end of week.

The Reserve Bank of Australia (RBA) will publish its latest financial stability review during Friday’s Asian session, with US consumer sentiment data from Michigan University due for publication during the American session.

If US consumer confidence beats expectations or if commodity news worsens notably, the Australian Dollar to US Dollar exchange rate could shed some of its weekly gains.

However, it would likely take some considerable downside movement in the next day for AUD/USD to not sustain at least some gains this week.

Australian Dollar investors may also be eager to remain firm on the currency ahead of next week, when key Australian job market stats and RBA meeting minutes will be published.

Josh Ferry Woodard

After leaving university in 2011 Josh briefly worked as a currency analyst in the South West of Cornwall. Josh continued monitoring the currency markets and publishing exchange rate analysis after moving to London in 2012, with a particular focus on the impact of economic and political stimuli on forex. Josh was a regular contributor to The Telegraph’s weekly currency feature for several years.

Contact Josh Ferry Woodard