Lack of Wage Growth Acceleration Leaves AUD/USD Exchange Rate Static
The Australian Dollar (AUD) has traded narrowly against the US Dollar (USD) so far today; this is mainly down to low confidence levels among AUD traders.
The Australian economy continues to suffer from low wage growth and stubborn inflation.
The lack of wage growth is a particularly troubling factor for AUD traders, as by all accounts higher employment should be pushing employers to raise salaries.
Because the pace of wage growth isn’t picking up, however, there is no additional incentive for the Reserve Bank of Australia (RBA) to consider raising interest rates, even in the face of somewhat higher inflation.
US Dollar to Australian Dollar (USD/AUD) Exchange Rate Static on Trade War Jitters
The US Dollar (USD) has held close to opening levels against the Australian Dollar (AUD) today owing to growing concerns about the effects of a US-China trade war.
A recent warning from economists at Oxford Economics has put the situation into stark focus:
‘The world’s two biggest economies are squaring up to each other over trade.
‘Lack of communication, strong ideological beliefs and basically non-negotiable strategic ambitions have brought us to the brink of a trade war that, if it materialises, will significantly exacerbate a global economic slowdown.’
Australian Dollar to US Dollar Exchange Rate Forecast: Will AUD/USD Rise on Falling US PMI Stats?
The Australian Dollar (AUD) has a chance to advance against the US Dollar (USD) this afternoon, when high-impact US PMI data comes out.
These preliminary figures will measure changes to services and manufacturing activity in July, as well as providing an overall composite reading.
The services and manufacturing readings aren’t expected to change from previous figures, but a forecast-matching slowdown in composite activity could still devalue the US Dollar.
Slower US economic activity increases the risks of the Federal Reserve leaving interest rates unchanged, which is a worrying possibility for USD traders.
Australian Dollar Outlook: Are Greater AUD/USD Gains ahead on AU Inflation Data?
The next major piece of Australian economic data, in the form of inflation figures for Q2 2018, could provide additional support to the AUD/USD exchange rate.
Current estimates are for an acceleration in the pace of price growth during Q2 2018, both on the quarter and on the year.
A faster pace of price growth could mean that the Reserve Bank of Australia (RBA) is under more pressure to raise interest rates; such a conclusion among AUD traders could boost the currency.