Australian Dollar US Dollar (AUD/USD) Exchange Rate Muted as Westpac Leading Index Remains Below Trend
The Australian Dollar US Dollar (AUD/USD) exchange rate remains muted and the pairing is currently trading at an inter-bank rate of $0.7011.
At the start of Wednesday’s session, data showed that Westpac’s Leading Index rose to -0.02% in June from May’s -0.47%.
The index indicates the probable pace of future economic activity.
Despite the index remaining below trend for a sixth consecutive month, it has been noted that this is a noticeable turnaround.
Commenting on this, Westpac Chief Economist Bill Evans stated:
‘These monthly movements can be choppy. Nevertheless the index growth rate remains below trend for a sixth successive month. Over the month, commodity prices; the sharemarket and dwelling approvals explained the improvement. On the other hand these positives were partly offset by deteriorating consumer confidence both overall and in the jobs market in particular.
‘With this big monthly turnaround, the Leading Index growth rate has lifted over the last six months from -0.36% in January to the current -0.02%.’
US Dollar (USD) Flat as ‘Uncertainties’ Increase Chances of a Fed Rate Cut
Meanwhile, on Tuesday the Chair of the US Federal Reserve Jerome Powell stated that ‘uncertainties’ have increased the chances of an interest rate cut.
In a speech, Fed Chair Powell repeated his promise to ‘act as appropriate’ to allow continued economic expansion in the US.
The increased chance of a Federal Reserve interest cut likely left the ‘Greenback’ under pressure on Wednesday.
In the speech, Powell noted:
‘Many FOMC participants judged at the time of our most recent meeting in June that the combination of these factors strengthens the case for somewhat more accommodative stance of policy.
‘We are carefully monitoring these developments and assessing their implications for the US economic outlook and inflation, and will act as appropriate to sustain the expansion, with a strong labour market and inflation near its symmetric 2% objective.’
President Trump Threatens China with Further $325 Billion Tariffs
Trade tensions between Washington and Beijing increased following threats of further tariffs.
On Tuesday, US President Donald Trump stated that the two sides have a long way to go on trade.
He also added that the United States could slap a further $325 billion worth of tariffs on Chinese imports ‘if we want’.
The President’s comments come just after the US and China agreed to avoid ramping up trade tensions in an effort to revive trade talks.
The increased tension likely weighed on the risk-sensitive ‘Aussie’ leaving the pairing muted on Wednesday morning.
Australian Dollar US Dollar Outlook: AUD under Pressure Ahead of Aussie Unemployment Data
Looking ahead to this afternoon, the US Dollar (USD) could edge up against the Australian Dollar (AUD) following the release of the US housing data.
If US building permits and housing starts both rise higher than forecast in June, it could buoy the ‘Greenback’.
Meanwhile, the ‘Aussie’ could be left under pressure following the release of the Australian unemployment rate.
If unemployment remains unchanged at 5.2%, but Aussie employment change does not increase as high as forecast, the Australian Dollar US Dollar (AUD/USD) exchange rate could slide.