Australian Dollar to US Dollar (AUD/USD) Exchange Rate Firms on Hopes for US-China Trade Talks
Despite warnings from the US and China this week that neither would not give in to trade demands from the other, the Australian Dollar to US Dollar (AUD/USD) exchange rate is on track to sustain most of this week’s gains.
Due to weakness in the US Dollar (USD) and some risk-on movement, AUD/USD has climbed from this week’s opening interbank levels of US$0.71 since Wednesday. Today, AUD/USD is trending nearer the interbank level of US$0.72, although it has been unable to hold onto Thursday’s weekly high.
Investors bought back into the Australian Dollar (AUD) as the currency recovered from its recent lows, thought to have been caused by profit-taking. The ‘Aussie’ was able to rebound more easily thanks to stronger market demand for global risk correlated currencies.
As hopes have risen that the US will hold trade talks with major nations including China and Canada, investors are less eager to keep buying safe haven currencies like the US Dollar.
Australian Dollar (AUD) Exchange Rates Supported by Risk-Sentiment and Data
As the US and China look to seek out a new round of trade negotiations, the demand for safe haven currencies that has persisted in recent weeks finally softened.
Demand for the Australian Dollar was supported further by domestic news, as Australia’s latest job market stats beat expectations in several major prints.
August’s Australian employment change report was forecast to have improved from -4.3k to 15k, but instead jumped to an impressive 44k. Full-time employment was strong too, rising to 33.7k.
Also notable was the unemployment rate. Even though Australia’s participation rate unexpectedly rose from 65.6% to 65.7%, the key unemployment rate remained at 5.3% as forecast. This indicated that the job market was strong.
US Dollar (USD) Exchange Rate Pressured by Risk-On and US Inflation Stats
Investors have been hesitant to keep buying the US Dollar (USD) this week, as despite persistent fears of US trade protectionism, hopes for new trade talks have made investors happier to take risks again.
The US Dollar has been sold off its best levels as safe haven demand slides, but the dollar was pressured further on Thursday by the latest US Consumer Price Index (CPI) inflation data.
US inflation surprised investors when it fell short of forecasts in every major print. Monthly inflation remained at 0.2% rather than rising to the predicted 0.3%, while yearly inflation fell to 2.7% instead of the forecast 2.8%.
The core inflation rates were disappointing too, coming in at 0.1% MoM and 2.2% YoY. While not the Federal Reserve’s inflation measure of choice, the data still caused concern that the Fed may need to slow its pace of interest rate hikes going forward.
Australian Dollar to US Dollar (AUD/USD) Outlook Could Rise Further if US Retail Data Disappoints
The Australian Dollar to US Dollar (AUD/USD) exchange rate is on track to sustain around a cent of gains this week.
AUD/USD could see even further gains before the week is up though if Friday’s upcoming US data disappoints investors.
Key US retail sales stats, as well as the Michigan University confidence survey will be published during the American session and although they are expected to be robust they could cause some late-week US Dollar (USD) movement if they surprise investors to the downside.
Of course, any developments in US trade talks with China could move both the Australian Dollar (AUD) and US Dollar, as both currencies are linked to risk-sentiment.
Worsening trade fears would weaken the relatively vulnerable Australian Dollar at the expense of the US Dollar.
Next week will be quieter for data, but the release of the Reserve Bank of Australia’s (RBA) upcoming meeting minutes could prove influential to the Australian Dollar to US Dollar (AUD/USD) exchange rate.