Forecast-Beating US Inflation Growth Fails to Reverse Positive AUD/USD Exchange Rate
The Australian Dollar (AUD) has continued to appreciate against the US Dollar (USD) on Tuesday afternoon, despite strong US inflation rate figures.
The rate of year-on-year price growth in May has accelerated from 2.5% in 2017 to 2.8% in 2018, which strengthens the case for additional Fed interest rate hikes in 2018.
US Dollar traders may be instead unsettled by a more near-term Fed event – Wednesday evening’s interest rate decision.
The US central bank is predicted to raise interest rates from 1.75% to 2%, but this isn’t set in stone.
As such, despite the supportive inflation rate news, underlying uncertainty could be keeping US Dollar exchange rates in check.
Rising Risk Sentiment Pushes AUD/USD Exchange Rate Higher
The Australian Dollar (AUD) has made a minor advance against the US Dollar (USD) today, thanks to increasing risk appetite among currency traders.
This comes despite disappointing news out of Australia, with NAB Bank’s business confidence measure showing a dip in May.
The figure has fallen from 11 points to 6, exceeding the worst estimates for a 9 point printing.
A positive reading means that the number of optimistic respondents outweighs pessimistic ones, but this news hasn’t offered much support to the AUD.
Risk sentiment has risen partly because of events in Singapore, where a US-North Korea meeting has brought the potential of reduced tensions for Australia as well as Asian nations.
US Dollar to Australian Dollar (USD/AUD) Exchange Rate Drops on Trump-Kim Meeting
On the other side of the currency pairing, the US Dollar (USD) has fallen against the Australian Dollar (AUD) and a number of other peers during today’s trading session.
This deterioration is down to US Dollar trader uncertainty; a US-North Korea summit has just taken place, and there will also be a major US central bank event on Wednesday.
In the former case, the meeting between President Donald Trump and NK leader Kim Jong-un has been cautiously labelled as a success.
A document signed by both leaders does not specifically commit to a firm timeline of denuclearisation in North Korea, but even so, the Trump-Kim meeting is an historic one.
Observers believe the real test is yet to come, as the two men must now transform positive sentiment and handshakes into tangible actions to de-escalate tensions in Asia.
Australian Dollar to US Dollar Exchange Rate Forecast: AUD/USD Volatility ahead on Fed Interest Rate Decision
The Australian Dollar (AUD) is at risk of falling sharply against the US Dollar (USD) in the near-term, when the US central bank makes a key interest rate decision.
Before the Federal Reserve interest rate decision, however, the AUD/USD exchange rate could be affected by today’s US inflation data and tomorrow’s early AU ecostats.
The most immediate US news will be inflation rate readings for May, out this afternoon. The US Dollar could rise sharply on the results, as levels of year-on-year inflation are tipped to rise.
Higher inflation might increase the odds of three Fed interest rate hikes in 2018, so this would be supportive news.
There is a slim chance of an AUD/USD advance early on Wednesday, should June’s Westpac consumer confidence index show growth as expected.
Unfortunately for Australian Dollar traders, a mid-week decline is possible because of Wednesday evening’s Fed interest rate decision.
A rate hike from 1.75% to 2% has been priced in by currency traders; such a result could push the US Dollar up against the Australian Dollar.