Australian Dollar to US Dollar (AUD/USD) Exchange Rate Rebounds from Worst Levels after RBA Decision
While the Reserve Bank of Australia’s (RBA) latest policy decision had little impact on the Australian Dollar (AUD) outlook, the Australian Dollar to US Dollar (AUD/USD) exchange rate rebounded from its lows during the European session.
Still, AUD/USD may be on track for another week of losses regardless. AUD/USD avoided last week’s interbank low but still ended the week lower, in the region of US$0.74.
This week so far, AUD/USD has slumped again and has hit a low of US$0.73 – the pair’s worst level since January 2017. AUD/USD has recovered from its lows, but is still trending in the interbank region of US$0.73 at the time of writing.
A combination of hitting key support levels and weaker US data helped the AUD/USD recovery, but its gains were still limited due to the Australian Dollar’s own broad weakness.
Australian Dollar (AUD) Exchange Rate Rebound Muted as RBA Takes Familiar Stance
Investors opted to buy the risk-correlated Australian Dollar (AUD) back from its worst levels during Tuesday trade and take profit, but the currency still didn’t have much in the way of support.
The Reserve Bank of Australia (RBA) held its July policy decision meeting during Tuesday’s Asian session and the result was generally unsurprising to investors, with bank policymakers taking a familiar, cautious and neutral tone towards Australia’s economic outlook.
As was widely expected, the bank left monetary policy frozen. RBA Governor Philip Lowe noted uncertainties including softer household spending and high household debts were among the current economic concerns.
Lowe also warned that risks to global trade from recent US protectionism presented a downside risk to the Australian economy.
In his concluding remarks Lowe said that Australian inflation would remain subdued for quite some time to come, so overall the meeting gave investors little to be bullish about.
US Dollar (USD) Sold on Concerns of US Tariffs Affecting Businesses
While June’s US manufacturing PMIs from Markit and ISM both beat expectations on Monday, the details of the reports gave US Dollar (USD) investors plenty to be concerned about.
Markit’s final June manufacturing PMI for the US fell from the previous 56.4 to a four-month-low of 55.4, but avoided falling as far as the forecast 54.6.
Despite this, Markit Chief Economist Chris Williamson noted that business optimism looking forward was definitely weaker, due partially to US trade tariff developments:
‘Business optimism about the year ahead also fell to the lowest since January, with survey respondents worried in particular about the potential impact of trade wars and tariffs.
Tariffs were widely blamed on a further marked rise in input costs, and also linked to worsening supply chain delays – which hit the highest on record, exacerbating existing tight supply conditions.’
ISM’s more influential manufacturing PMI, on the other hand, did improve from 58.7 to a better-than-expected 60.2, but is was also noted that the tariffs were beginning to have a negative impact on business outlooks.
Australian Dollar to US Dollar (AUD/USD) Forecast: Australian Trade Data in Focus
It may take a lot for the Australian Dollar to US Dollar (AUD/USD) exchange rate to mount a strong recovery, as global trade jitters keep risky commodity-currencies like the Australian Dollar (AUD) looking unappealing.
However, if upcoming Australian data impresses or US data disappoints, AUD/USD could continue its current climb.
Wednesday will see the publication of Australia’s June services PMI from AiG, as well as the May trade balance update.
As trade news has consistently hit headlines in recent months, May trade results could give investors a better idea of how trade worries are affecting Australian trade.
If the data is even gloomier than expected on trade, AUD/USD may give up its recovery attempts and weaken again.
US data will take focus on Thursday, when non-manufacturing PMIs from Markit and ISM, as well as the Federal Reserve’s latest meeting minutes, could influence the Australian Dollar to US Dollar (AUD/USD) exchange rate.