Australian Dollar to US Dollar (AUD/USD) Exchange Rate Remains Higher ahead of Federal Reserve Decision
Despite the Reserve Bank of Australia’s (RBA) caution in its latest meeting minutes report, the Australian Dollar to US Dollar (AUD/USD) exchange rate has been able to avoid losses this week amid Federal Reserve uncertainty.
Due to US Dollar (USD) weakness and some heightened risk-sentiment, AUD/USD put in solid gains of almost half a cent last week, but still and trended near the interbank level of $0.70.
When markets opened yesterday, AUD/USD briefly saw a jump in demand on fresh risk-sentiment, and touched its best levels since February.
At the time of writing on Tuesday morning, AUD/USD was trending a little lower but was still above the week’s opening levels and relatively close to its March best at an inter-bank rate of $0.7097.
This was due largely to signs of weakness in recent US data, leaving the US Dollar unappealing ahead of the Federal Reserve’s March policy decision on Wednesday.
Australian Dollar (AUD) Exchange Rates Struggle to Hold Best after RBA Report
This morning saw the publication of the Reserve Bank of Australia’s (RBA) latest meeting minutes, in which the bank expressed caution about the economic outlook and indicated that its stance on monetary policy would not change in the short term.
Due to the slowing global economic growth outlook, as well as concerns that Australia will not reach the RBA’s target band for inflation any time soon, bets are rising that the bank could cut interest rates at some point this year.
The bank’s cautious tone, combined with a lack of strong data recently, left the Australian Dollar (AUD) a little less appealing today.
In particular, the bank is concerned about the disconnect between strong Australian employment data compared with weaker growth.
Despite this, the Australian Dollar was able to avoid major losses versus the US Dollar.
US Dollar (USD) Exchange Rates Limp as Investors Anticipate Federal Reserve
The weak performance that the US Dollar (USD) has put in since last week has been unchanged this week so far, as the only US data to publish has been underwhelming and investors highly anticipate tomorrow’s Federal Reserve monetary policy decision.
Investors have found the US Dollar less appealing, as US data has begun to indicate that the US economic outlook has indeed been negatively impacted by slowing global growth in Q1 2019.
At the end of last week, US factory data fell short of expectations, and Monday’s US housing market data from NAHB remained at 62 rather than improving to 63, as expected.
Due to the slowing US data, investors are anxious that the Federal Reserve could take a more dovish stance on monetary policy during its March policy decision tomorrow evening.
Australian Dollar to US Dollar (AUD/USD) Exchange Rate Traders Await Federal Reserve Decision
While the Australian Dollar to US Dollar (AUD/USD) exchange rate is trending higher so far this week, the pair could see a shift in demand towards the end of the week in reaction to upcoming data and central bank news.
Wednesday will see the publication of Westpac’s Australian leading index data from February, but the primary focus of the day will be the Federal Reserve’s March policy decision.
Markets expect the Fed will leave monetary policy frozen during its March decision, but the tone the bank takes on its monetary policy could be particularly influential if it surprises investors.
Some investors are speculating that the bank could be even more dovish than expected, with some even betting on an interest rate cut from the Fed later in the year.
If the Fed avoids showing any signs that a rate cut is on the way, AUD/USD could slide as US Dollar (USD) demand would improve again slightly.
Australian Dollar (USD) investors will be much more focused on Thursday’s upcoming Australian job market report, which could help the Australian Dollar to US Dollar (AUD/USD) exchange rate hold some of this week’s gains if they impress.