Australian Dollar to US Dollar (AUD/USD) Exchange Rate Unappealing on RBA Caution and Chinese Growth Jitters
Investors were hesitant to boost the Australian Dollar to US Dollar (AUD/USD) today, as various factors weighing on market risk-sentiment as well as caution ahead of an upcoming Australian growth report left the risk-correlated Australian Dollar (AUD) unappealing.
A brief surge in risk-sentiment last week pushed AUD/USD higher, but towards the end of the week the pair tumbled again and ultimately closed the week near the interbank level of $0.70.
AUD/USD has been unable to recover much from these lows since then either, as risk-sentiment remains limited this week and the Australian Dollar lacks notable support from recent data.
As the US economic outlook remains strong and investors have largely brushed over perceived jawboning from US President Donald Trump, the US Dollar has easily held its highs.
Australian Dollar (AUD) Exchange Rates Limp as Reserve Bank of Australia (RBA) Maintains Caution
The Reserve Bank of Australia (RBA) held its March policy decision during Tuesday’s Asian session, and the tone the bank took regarding Australia’s economic and monetary policy outlooks was largely unsurprising to investors.
Despite a credit squeeze and falling property prices, the RBA opted to remain in ‘wait and see’ mode regarding monetary policy.
While the bank expects economic growth to pick up this year and was happy about the strong labour market, there are concerns that weak overall growth could pressure the bank to cut Australian interest rates later in the year.
On top of Australian growth uncertainty, the Australian Dollar (AUD) was pressured by concerns about China’s economic growth as China is Australia’s biggest trade partner.
China cut its growth forecasts, one of the firmest signs yet that the nation’s economy was slowing.
US Dollar (USD) Exchange Rate Appealing amid Firm US Outlook
With US President Donald Trump’s tendency to criticise the strength of the US Dollar (USD) and the Federal Reserve’s interest rate hikes have spooked investors in the past, his latest comments ultimately had little impact on the US currency.
Analysts and markets doubt that Trump’s comments will have any impact on US interest rates, as the Fed has already seemingly finished its interest rate hike cycle but is unlikely to cut rates soon either.
As a result, his comments were brushed aside and investors continued to find the US Dollar appealing due to the solid US economic outlook.
US economic performance has remained fairly strong despite slowing global growth. This, combined with the US Dollar’s status as a safe haven currency has kept the currency appealing.
Australian Dollar to US Dollar (AUD/USD) Exchange Rate Investors Eagerly Await Australian Growth
The Australian Dollar to US Dollar (AUD/USD) exchange rate is likely to remain steady until the publication of Australia’s highly anticipated Q4 Gross Domestic Product (GDP) growth rate stats.
Due for publication during Wednesday’s Asian session, Australian growth is forecast to have remained at 0.3% quarter-on-quarter and have slowed slightly to 2.5% year-on-year.
There are concerns that due to recent weakness in Australian data though, Australian growth may have been slower than expected at the end of 2018.
As a result, if growth stats print below forecasts the Australian Dollar (AUD) could weaken and a comparatively sturdy US Dollar (USD) could push AUD/USD lower.
Wednesday will see the publication of some notable US data too, including December’s trade balance results and ADP’s February employment change figures.
Of course, any surprising developments in US-China trade negotiations or other news that shifts risk-sentiment could also drive movement in the Australian Dollar to US Dollar (AUD/USD) exchange rate.