Australian Dollar to US Dollar (AUD/USD) Exchange Rate News: Federal Reserve in Focus as AUD Held Down

Australian Dollar to US Dollar (AUD/USD) Exchange Rate Fails to Recover Despite Solid Australian Data

Mixed market demand for risk-correlated commodity-correlated currencies like the Australian Dollar (AUD) meant that the Australian Dollar to US Dollar (AUD/USD) exchange rate has been unable to recover, despite some solid Australian data on Wednesday.

While AUD/USD made some modest gains from the interbank level of AU$0.75 to AU$0.76 last week, the pair could be on track to shed all of those gains this week.

At the time of writing on Wednesday morning, AUD/USD was trending near the interbank level of AU$0.75 again.

Demand for the US Dollar (USD) has been stronger again this week, as the currency has benefitted from developments in geopolitics, such as the meeting between US President Trump and North Korean leader Kim.

As a result of US Dollar strength, the Australian Dollar has been unable to hold its ground despite decent Australian data.

Australian Dollar (AUD) Exchange Rates Avoid Further Losses on Australian Consumer Confidence

The Australian Dollar (AUD) may have seen even weaker trade on Wednesday if it were not for the latest Australian consumer confidence survey results.

The June confidence survey results, from Westpac, showed a solid improvement in the confidence index. The index rose from 101.8 to 102.2, with the confidence change figure coming in at 0.3% following last month’s -0.6%.

Australian Dollar (AUD) demand was likely dimmed by some of the comments from the report, with Wesptac noting that consumers had a less optimistic view of Australia’s economy.

According to Matthew Hassan, Westpac Research Analyst:

‘The June survey detail suggests the sentiment mix may be starting to shift with a better read on family finances, albeit offset by a less upbeat assessment of the economy.’

The Australian Dollar has also been weighed on by Tuesday’s disappointing Australian business confidence survey data, and market demand for safe haven currencies like the US Dollar (USD).

US Dollar (USD) Exchange Rates Firm Ahead of Federal Reserve Decision

Demand for the US Dollar (USD) has firmed within a relatively tight range in the past few days.

While the US Dollar briefly climbed ahead of a highly-anticipated summit between US President Donald Trump and North Korea Leader Kim Jong-un, the currency was a little weaker on Tuesday.

Still, the US currency was largely able to sustain its gains against the Australian Dollar, partially due to stronger-than-expected US inflation results on Tuesday.

May’s US Consumer Price Index (CPI) report beat forecasts in its yearly print, jumping from 2.5% to 2.8% rather than the expected 2.7%.

The monthly figure came in at 0.2% as forecast, and both core inflation figures also met expectations.

Investors are hesitant to move much on the US Dollar ahead of Wednesday evening’s Federal Reserve policy decision. The Fed is expected to hike US interest rates and offer its latest outlook on the strength of the US economy.

Australian Dollar to US Dollar (AUD/USD) Forecast: Federal Reserve and Australian Job Stats in Focus

The Federal Reserve is forecast to make its second 2018 interest rate hike during its policy decision on Wednesday evening, but with three 2018 rate hikes already priced into the US Dollar (USD) this is unlikely to cause much movement in AUD/USD.

Instead, investors will be looking for any shifts in tone from the bank regarding the US economic outlook.

If the Fed is more hawkish than expected on the US economy, market expectations of there being four 2018 rate hikes in total will rise and the US Dollar may strengthen.

On the other hand, if the Fed is more cautious than expected the US Dollar could weaken. This may help the Australian Dollar to US Dollar (AUD/USD) exchange rate to advance towards the end of the week.

AUD/USD trade could also be influenced by Thursday’s Australian job market results. More optimistic Australian data could help the Australian Dollar to US Dollar (AUD/USD) exchange rate make a late-week recovery.

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