Australian Dollar to US Dollar Exchange Rate Movement Limited as Investors Anticipate Fed Meeting
Following a notable fall last week, the Australian Dollar to US Dollar (AUD/USD) exchange rate has seen more modest movement this week so far. The Australian Dollar’s (AUD) attempts at a rebound have been limited due to underwhelming Chinese data.
Last week saw big movements in AUD/USD. After opening the week at the interbank level of $0.71, AUD/USD spent the week tumbling.
While the pair avoided the mid-week’s three month low of $0.69, the pair still ended the week over a cent lower and has been unable to recover much this week.
With movement in AUD/USD still limp, investors are now anticipating major US data and Federal Reserve news expected tomorrow.
Australian Dollar (AUD) Exchange Rates Fail to Hold Gains as Chinese Data Disappoints
Demand for the Australian Dollar (AUD) rebounded just slightly yesterday, as investors cooled from last week’s selloff and bought the trade-correlated currency back slightly in profit-taking.
Some fresh weakness in the US Dollar (USD) also made it easier for the Australian Dollar to begin a recovery.
However, the Australian Dollar’s attempts at gains were cut short this morning, as China’s latest ecostats fell short of expectations and Australia’s latest private sector credit stats weren’t particularly impressive either.
As China is Australia’s biggest trade partner, investors were disappointed when the April manufacturing PMIs fell short of expectations.
Both the NBS and Caixin manufacturing prints came in close to stagnation, putting fresh pressure on the trade-correlated Australian Dollar this morning.
US Dollar (USD) Exchange Rates Unable to Capitalise on Rival Weakness
While the Australian Dollar (AUD) has been unappealing since last week, the US Dollar’s (USD) advance was stopped short on Friday and the currency has been unable to regain its best levels.
Investors were hesitant to keep buying the US Dollar following last week’s US growth report. While the headline growth figure was impressive, other stats in the report indicated that US inflation was weakening more than expected.
Signs of weakness in US inflation were merely exacerbated yesterday as the latest US Personal Consumption Expenditure (PCE) report fell short in most major prints.
These figures not only worsened concerned about US price pressures, but also cause a jump in speculation that the Federal Reserve could cut US interest rates sometime this year.
As Federal Reserve interest rate hike bets rose, the US Dollar’s potential for gains was limited and investors became even anxious for Wednesday’s Fed meeting.
Australian Dollar to US Dollar (AUD/USD) Exchange Rate Could Climb if Fed Becomes More Dovish
While today’s US Chicago PMI and pending home sales are unlikely to be particularly influential, tomorrow’s session could be a big one for the AUD/USD exchange rate.
The Asian session will start off the day with Australia’s April manufacturing PMI. If this beats expectations it could boost hopes about the resilience of economic activity and AUD could strengthen.
However, the biggest news will come during the American session, when US manufacturing PMI data will be published and the Federal Reserve will hold its May policy decision in the evening.
Following the recent signs of weakness in US inflation, investors are speculating that the Federal Reserve could take a more dovish tone on US monetary policy.
While no change to US monetary policy is expected tomorrow, a more dovish tone from the central bank regarding future policy could inspire US Dollar losses.
Of course, with US-China trade negotiations set to resume today as well, any surprises here could also cause notable Australian Dollar to US Dollar (AUD/USD) exchange rate movement.