Australian Dollar to US Dollar (AUD/USD) Exchange Rate Lower despite Lack of USD Strength
Hopes that the Reserve Bank of Australia (RBA) would avoid cutting Australian interest rates any time soon, as well as broad weakness in the US Dollar (USD), left the Australian Dollar to US Dollar (AUD/USD) exchange rate climbing last week.
After opening last week at the interbank level of $0.71, AUD/USD saw a solid jump in demand and closed the week over a cent and a half higher. On Friday, AUD/USD even touched its best level since the beginning of March.
However, this week so far AUD/USD has taken a hit and lost some of its recent gains.
While demand for the US Dollar remains mixed, the Australian Dollar (AUD) has seen a selloff today as investors react to the latest meeting minutes report from the RBA.
Australian Dollar (AUD) Exchange Rates Down on Reserve Bank of Australia’s Dovishness
Due to some signs of resilient economic activity, as well as some comments from RBA Deputy Governor Guy Debelle who appeared hesitant to strike a dovish tone, the Australian Dollar (AUD) had been stronger in recent weeks.
The relatively risk-correlated currency had also benefitted from most rises in risk-sentiment, as lower RBA interest rate cut bets made it more appealing versus rivals like the New Zealand Dollar (NZD).
However, following the Reserve Bank of Australia’s latest meeting minutes report, investors became a little more cautious about the economic outlook again and sold the ‘Aussie’ from its best levels in reaction.
The details of the RBA’s most recent meeting didn’t pledge to an interest rate cut, but the bank indicated that a rate cut would be appropriate if inflation doesn’t improve or if unemployment rises.
It matched the Deputy Governor’s ‘wait and see’ attitude, but the tone was still comparatively dovish and left analysts speculating that the bank was fully prepared to cut interest rates this year if necessary.
US Dollar (USD) Exchange Rates Fail to Capitalise amid Expectations of US Slowdown
Demand for the US Dollar (USD) has been weaker over the past few weeks, as US data has started to signs that the economy has been negatively impacted by the slowdown in global growth.
This has combined with a more cautious stance from the Federal Reserve on monetary policy, with the central bank indicating that it will likely not hike interest rates at all this year.
Due to these factors, the US Dollar saw poor performance throughout last week and this made it easier for AUD/USD to register solid gains.
At the end of the week, the latest US Michigan consumer confidence print fell short of expectations, furthering concerns about weaker economic activity. Monday’s US Empire manufacturing report indicated that businesses were less optimistic about the coming six months.
With US economic uncertainties creeping higher and investors not expecting any hawkishness from the Federal Reserve any time soon, the US Dollar has remained under pressure and AUD/USD losses have been limited.
Australian Dollar to US Dollar (AUD/USD) Exchange Rate Could Tumble Further if US Data Impresses
The Australian Dollar to US Dollar (AUD/USD) exchange rate is weaker today, but due to hopes over Australian economic resilience and signs of weakness in US data, the pair’s losses have been limited.
AUD/USD is still holding onto most of last week’s gains, and further losses are unlikely without more news to influence the market’s economic outlook.
As a result, investors are anticipating tomorrow’s session, when Australian leading index and US trade balance data will be published.
However, Thursday’s Australian jobs market stats and US retail sales are even more likely to be vital.
If Australia’s unemployment rate disappoints, Reserve Bank of Australia (RBA) interest rate cut bets will worsen and the Australian Dollar (AUD) will weaken.
Meanwhile, if US retail data impresses investors it could boost hopes for US economic resilience, and the Australian Dollar to US Dollar (AUD/USD) exchange rate would be even less appealing.