Slowing Inflation Triggers Australian Dollar to US Dollar (AUD/USD) Exchange Rate Losses

AUD/USD Exchange Rate Ticks Lower on Slower Pace of Price Growth

The Australian Dollar (AUD) has made a minor loss against the US Dollar (USD) today following the news that Australian inflation has slowed.

The figures for Q3 2018 have shown a year-on-year dip from 2.1% to 1.9%, which puts the pace of inflation below the Reserve Bank of Australia’s (RBA) target range.

This is a disappointing development for AUD traders, as it means that there is a reduced chance of an interest rate hike.

Suggesting that other conditions for an RBA rate hike are also unfavourable, Indeed Chief Economist Callam Pickering said:

‘Although the unemployment rate has dipped to 5%, broader measures of labour market slack remain elevated and point towards a prolonged period of disappointing wage growth.’

US Dollar to Australian Dollar Exchange Rate Rises despite US-China Trade Clash

The US Dollar (USD) has ticked higher against the Australian Dollar (AUD) today, thanks to signs that there could be progress in talks between the US and China over trade.

Although US President Donald Trump has warned about imposing additional tariffs on China if he doesn’t secure a new trade deal, Mr Trump has still expressed optimism about obtaining a ‘great deal’.

The situation remains tense, but the simple fact that both sides are still talking has been enough raise USD trader confidence.

Australian Dollar to US Dollar Exchange Rate Forecast: AUD/USD Losses ahead on US Employment Data?

The Australian Dollar’s (AUD) recent dip against the US Dollar (USD) could worsen in the near-future, when high-impact US jobs market data comes out this afternoon.

The main ecostat will be the ADP employment change reading for October, which is currently expected to show a 189k increase in the number of employed persons.

This would be below the 230k rise seen in September, but might still be a large enough figure to cause a US Dollar to Australian Dollar exchange rate rise.

The US Dollar could also appreciate when later crude oil stock data comes out – if this shows lower stockpiles then crude oil prices could rise, which is Dollar-positive as most oil is internationally traded in USD.

The next solid Australian data to watch out for will be this evening’s manufacturing activity reading and Thursday’s trade balance stats.

Current forecasts are for a slowdown in manufacturing sector activity but a rise in the national trade surplus.

Adam Solomon

Adam joined the team at TorFX soon after graduating from University in 2005 with a degree in Journalism. Since then Adam has advanced to become both Head of Trading and Head of Treasury. His keen interest in the currency market and knowledge of what drives exchange rates makes him perfectly positioned to produce regular market updates focused on the movements of the major currencies.

Contact Adam Solomon