Australian Dollar to US Dollar (AUD/USD) Exchange Rate Bounces Back from Tuesday Slump
Despite an increasingly dovish stance from the Reserve Bank of Australia (RBA) this week, the Australian Dollar to US Dollar (AUD/USD) exchange rate saw a solid rebound in demand this morning thanks to some surprisingly strong Australian data.
Since opening the week at the interbank level of $0.70, AUD/USD has seen broad fluctuations due to uncertainties about whether or not the RBA will cut Australian interest rates in the coming year or not.
AUD/USD briefly jumped at the beginning of the week, before plummeting yesterday and jumping again this morning as market sentiment towards the relatively risky trade-correlated currency fluctuated.
This movement has been driven largely by shifts in Australian Dollar (AUD) demand, while the US Dollar (USD) has been reacting to shifts in risk-sentiment and strength in its rivals due to signs of weakness in US data and positive progress in trade talks with China.
Australian Dollar (AUD) Exchange Rates Benefit from Strong Australian and Chinese Data
Earlier in the week, investors sold the Australian Dollar (AUD) en masse as they digested a new line in the Reserve Bank of Australia’s (RBA) policy statement that indicated the bank was prepared to ‘adjust monetary policy to support the economy’.
It was the strongest signal yet that the RBA was prepared to cut interest rates due to slowing global growth and trade concerns.
However, the ‘Aussie’ rebounded just a day later. This morning’s stronger-than-expected Australian ecostats, as well as stronger Chinese PMI data, made investors a little more confident about the economy again and this supported Australian Dollar strength.
In particular, investors were pleased with Australia’s February rebound in retail sales activity. The figures unexpectedly rose 0.8%, well above the expected 0.2%.
According to Kaixin Owyong, Market Economist at NAB, it could even dampen the chances of an RBA rate cut:
‘The lift in retail sales was a very solid outcome that gives the RBA some reassurance that household spending could bounce back in the first quarter,
There may be some price impacts at play – food sales were unusually strong – but these data give the RBA room to remain on hold.’
US Dollar (USD) Exchange Rates Fail to Hold Gains amid Mixed US Data
Movement in the US Dollar (USD) has been mixed this week so far, with the US currency moving more in reaction to rivals amid a lack of major domestic driving factors.
Market concerns that the US economy is being impacted by slowing global growth have persisted, as this week’s US data has been too mixed to offset economic uncertainties.
US retail sales came in much lower than expected in February, and durable goods orders printed a contraction as expected.
These stats gave investors no fresh reason to believe the Federal Reserve would step away from its recent cautious tone, and left market demand for the US Dollar limited.
This morning, some additional strength in the Euro (EUR) also weakened the US Dollar, as the Euro often sees a negative correlation with US Dollar movement.
Australian Dollar to US Dollar (AUD/USD) Exchange Rate Investors Anticipate Major US Data
Any major shifts in risk-sentiment towards the end of the week, for example on US-China trade negotiations, are likely to be the focus for Australian Dollar (AUD) investors over the coming sessions.
While Australian Dollar to US Dollar (AUD/USD) exchange rate movement has been driven largely by Australian news and data over the past few sessions though, more key US data is due in the second half of the week this could change.
US Dollar (USD) investors are looking ahead to this afternoon’s key US non-manufacturing PMI data from ISM, as well as the latest ADP employment change data.
If the PMI beats expectations, it could bolster US Dollar support and make investors a bit more confident about the resilience of the US economy.
More key US data due for publication before the end of the week includes jobless claims tomorrow and the key March Non-Farm Payroll report on Friday.
The NFP report is typically influential for the Federal Reserve outlook, so any surprises here could influence Fed bets and the Australian Dollar to US Dollar (AUD/USD) exchange rate.