Australian Dollar to US Dollar Exchange Rate Tumbles as Trade Fears Persist
Signs that trade war jitters were subsiding turned out to be short-lived on Wednesday and the Australian Dollar to US Dollar (AUD/USD) exchange rate continued to tumble into Thursday.
Since opening at the interbank level of US$0.74 this week, AUD/USD has been falling at a pretty steady pace. At the time of writing on Thursday, AUD/USD was trending near a low of US$0.73 and its worst levels in over a year.
Due to persistent concerns about how Australia’s economy may be impacted by a US-China trade war, the Australian Dollar to US Dollar exchange rate has hit its worst levels since January 2017.
The Australian Dollar (AUD) lacks domestic support and remains among the currencies worst affected by the rising world trade tensions.
Essentially, unless the US backs down on its robust trade stances on China soon, the Australian Dollar could be in for even further losses.
Australian Dollar (AUD) Exchange Rate Selloff Continues as Trade Tensions Only Worsen
On Wednesday, the US appeared to be edging away from one of its most controversial plans for trade regarding China, but later in the session indicated that this was not the case.
US President Donald Trump said he would use the Committee on Foreign Investment in the United States (CFIUS) to handle issues of China acquiring US technology.
This was initially perceived as a softening of the previous stance, which was reportedly to block firms with 25% or more Chinese ownership from buying US tech companies.
However, US economic adviser Larry Kudlow stated in an interview later in the day that this did not indicate Trump was softening on China.
Kudlow’s comments worsened concerns that the US would continue to ramp up protectionist plans against China.
As China is Australia’s biggest trade partner, this has weighed heavily on the risk and trade-correlated Australian Dollar.
US Dollar (USD) Exchange Rate Strength Supported by US Goods Orders Data
Demand for the US Dollar (USD) had been weaker for much of the week so far, as investors have become more anxious about the possibility that trade protectionism is having a negative impact on the US economy too.
However, USD has still been able to climb against a considerably weaker Australian Dollar (AUD), despite the technical support below AUD/USD.
While trade worries support US Dollar trade against other major rivals, AUD/USD fell even lower following Wednesday’s session thanks to some solid US ecostats.
Wednesday saw the publication of May’s anticipated US durable goods orders, which beat expectations month-on-month.
The figure was forecast to lighten slightly from -1.7% to -1%, but instead lightened from a revised -1% to -0.6%.
US wholesale inventories were decent too, climbing from 0.1% to 0.5% and bolstering hopes that the US economy was resilient despite.
Australian Dollar to US Dollar Forecast: Disappointing US Data Could Help AUD/USD Rebound
Most of this week’s most influential ecostats will be published on Friday.
While the Australian Dollar to US Dollar (AUD/USD) exchange rate has been tumbling for most of the week, there is still a chance for the pair to rebound if the US outlook suddenly worsens.
As a result, investors are likely to keep a close eye on Friday’s US Personal Consumption Expenditure (PCE) data from May, as well as June’s Chicago PMI and June’s Michigan US consumer confidence survey results.
As PCE is the Federal Reserve’s preferred measure of inflation, an unexpected slowdown could knock Fed interest rate hike bets and make investors more likely to buy the Australian Dollar (AUD).
As for the ‘Aussie’ itself, it is likely to remain driven largely by trade developments. If the US doubles down on its protectionist stance against China, the Australian Dollar is likely to remain under pressure.
Investors may boost the Australian Dollar to US Dollar (AUD/USD) exchange rate if Australian home sales or private sector credit data impresses during Friday’s Asian session.