Australian Dollar US Dollar (AUD/USD) Exchange Rate Fails to Capitalise on Upbeat RBA Statement
A relatively upbeat Reserve Bank of Australia (RBA) Statement on Monetary Policy failed to offer the Australian Dollar to US Dollar (AUD/USD) exchange rate any particular support.
While the RBA reiterated its confidence in the domestic outlook and the fact that the next interest rate move is more likely to be up this was not enough to boost the Australian Dollar (AUD).
Markets see little chance of the central bank raising interest rates any time soon, with most investors expecting the RBA to remain on hold until mid-2019.
As a result, the upside potential of AUD exchange rates remains rather limited, especially as market risk appetite declined ahead of the latest US labour market data.
Falling US Unemployment Rate Could Dent Australian Dollar US Dollar (AUD/USD) Exchange Rate
The Australian Dollar to US Dollar (AUD/USD) exchange rate could come under further pressure this afternoon if the US non-farm payrolls report proves positive.
With forecasts pointing towards the unemployment rate dipping from 4.1% to 4.0% in April the US Dollar (USD) may find a fresh rallying point.
However, as the unemployment rate has failed to decline as forecast over the last two months USD exchange rates could slump sharply on the back of a fresh disappointment.
Unless the US labour market continues to tighten the US Dollar may struggle to push higher against its rivals, given the less hawkish nature of the Federal Open Market Committee’s (FOMC) May policy meeting.
Focus will also fall on the latest wage growth data, which could offer the AUD/USD exchange rate a boost if growth in average hourly earnings is found to have eased.
Improved Australian Confidence Forecast to Boost AUD/USD Exchange Rate
Stronger showings from the latest NAB business conditions and Westpac consumer confidence indexes may offer support to the Australian Dollar to US Dollar (AUD/USD) exchange rate.
Signs that the mood within the Australian economy is improving could help to bolster AUD exchange rates, boosting confidence in the domestic outlook.
However, even if sentiment improves sharply the odds of any imminent shift in the RBA’s policy outlook are limited.
An improvement in market risk appetite may also shore up the Australian Dollar over the coming days, providing that trade talks between the US and China do not show any signs of breaking down.
If Thursday’s consumer inflation expectations reading shows an uptick on the month, though, AUD exchange rates could return to a stronger footing.
Australian Dollar US Dollar (AUD/USD) Exchange Rate Weakness Forecast on Rising US Inflation
Commentary from Federal Reserve policymakers may provoke further volatility for the Australian Dollar to US Dollar (AUD/USD) exchange rate in the coming week.
If markets see signs of greater hawkishness this could encourage the US Dollar to return to a bullish footing once again.
USD exchange rates may also see gains on the back of the latest US consumer price index data next week, with forecasts pointing towards a fresh acceleration in inflationary pressure.
As long as inflation continues to pick up the case for a more aggressive pace of Fed monetary tightening is likely to build, to the detriment of the Australian Dollar to US Dollar (AUD/USD) exchange rate.