Hint of Higher Australian Interest Rates Strengthens AUD/USD Exchange Rate
The Australian Dollar (AUD) has risen by 0.3% against the US Dollar (USD) today thanks to the latest Reserve Bank of Australia (RBA) announcements and US developments.
In the former case, remarks from RBA Governor Philip Lowe have raised confidence in AUD and helped the antepedian currency advance
Mr Lowe has reiterated that the RBA will eventually raise interest rates, adding that the next rate change will ‘likely … be up, not down.’
‘Business as Usual’ RBA Minutes Offer Limited AUD/USD Support
While the RBA Governor has contributed to today’s Australian Dollar to US Dollar (AUD/USD) exchange rate gains, minutes from the latest RBA meeting have been less inspiring.
The RBA’s minutes for August have been little changed from their previous iterations, showing no immediate justification to raise Australian interest rates.
Among other factors, accelerating wage growth is considered essential before the RBA commits to a rate hike.
Trump’s Attack on Federal Reserve Drags US Dollar (USD) Exchange Rates Down
The US Dollar (USD) has fallen by -0.3% against the Australian Dollar (AUD) today, in addition to making noticeable losses in other currency pairings.
This decline comes after President Donald Trump criticised the Federal Reserve for raising US interest rates. Fed rate hikes often strengthen the US Dollar, and USD strength isn’t supporting Mr Trump’s goal of reducing the mountainous US trade deficit.
Australian Dollar to US Dollar Exchange Rate Forecast: Will AUD/USD Rise Further on Construction Data?
The Australian Dollar (AUD) could extend its current gains against the US Dollar (USD) on Wednesday as a result of a Q2 construction output reading.
Quarter-on-quarter construction sector activity is expected to rise from 0.2% to 0.7%; some optimistic economists anticipate an even larger rise up to 1.1%.
2018 opened with an -18.3% drop in construction sector activity during January, so any signs of continued growth could be enough to lift AUD.
Wednesday’s less predictable data release will be the evening’s Federal Reserve meeting minutes.
Under normal circumstances, if the minutes pointed to more Fed interest rate hikes over the rest of 2018 then the US Dollar would rise in value.
In the wake of President Trump’s criticism of higher interest rates, however, it is possible that hints of more rate hikes will have a diminished effect.