AUD/USD Exchange Rate Slides on Weak Australian Wage Figures
The Australian Dollar to US Dollar (AUD/USD) exchange rate fell to a fresh four-month low this morning as markets reacted to Australia’s latest wage figures.
At the time of writing the AUD/USD exchange rate is stuck at $0.69, leaving the pairing trading at its worst levels since the very start of 2019.
Australian Dollar (AUD) Softened by Sluggish Wage Growth
The Australian Dollar (AUD) continued to trend lower against the US Dollar (USD) throughout the Asian session on Wednesday, following the release of some disappointing domestic wage figures
According to the Australian Bureau of Statistics’ (ABS) Wage Price Index (WPI), wage growth in the first quarter of 2019 held at 0.5%, missing expectations of a modest lift to 0.6%.
This resulted in year-on-year wage growth holding at 2.3%, its strongest levels since 2014, but still well below the decade average, weakening AUD sentiment this morning.
The sluggish pace of wage growth will also come as a disappointment to the Reserve Bank of Australia (RBA), with analysts speculating that this will increase the chances that the bank will be forced to cut interest rates later this year.
Sarah Hunter, Chief Economist at BIS Oxford Economics, suggests:
‘Given the [RBA’s} focus on the labour market and its recent strong performance we don’t expect them to cut at their next meeting in June, but it’s looking increasingly likely that cash rate cuts will materialise in the second half of the year.’
US Dollar (USD) Remains Buoyed by Trade Jitters
At the same time, the US Dollar (USD) continues to enjoy support this morning as investors spooked be the reigniting of US-China trade tensions over the last couple of weeks continue to pile into the safe-haven currency.
Demand for the ‘Greenback’ has been tempered somewhat over the past 24 hours after a series of tweets from Donald Trump bolstered hopes that a US-China trade deal could still be reached eventually.
….of the tremendous ground we have lost to China on Trade since the ridiculous one sided formation of the WTO. It will all happen, and much faster than people think!
— Donald J. Trump (@realDonaldTrump) May 14, 2019
However, until there are actual signs that talks have begun to progress again, we are likely to see investors remain wary, likely resulting in the recent upside in the US Dollar continuing for the time being.
AUD/USD Exchange Rate Forecast: Slowing Retail Sales to Clip the ‘Greenback’?
Looking ahead, we may see the Australian Dollar to US Dollar (AUD/USD) exchange rate look to rally later this afternoon, following the publication of the latest US retail sales figures.
Economists forecast that retail sales in the US will have slowed sharply in April, with USD exchange rates potentially weakening as sales growth slumps from 1.6% to just 0.2%.
Possibly placing further pressure on the US Dollar will be the subsequent release of some domestic industrial figures, with factory output in the US expected to have stagnated last month.
Meanwhile, AUD investors will be gearing up for the publication of Australia’s labour report overnight on Wednesday, with the ‘Aussie’ set for further losses if the unemployment rate is shown to have risen as expected in April.