Mixed Signals from Trade War and Data Leave Australian Dollar to US Dollar (AUD/USD) Exchange Rate Volatile

Australian Dollar to US Dollar Exchange Rate Struggles to Sustain Recovery

While the Australian Dollar to US Dollar (AUD/USD) exchange rate has been able to rebound from this week’s lows, the pair’s recovery has been limited as trade war jitters continue to weigh heavily on the Australian Dollar (AUD) outlook.

Since opening this week at the interbank level of 0.67, AUD/USD has trended largely with a downside bias save for a brief mid-week rebound.

Towards the end of the week, AUD/USD recovered again from a weekly low to trend closer to the week’s opening levels at the time of writing.

Speculation that the US economy could see a recession in the coming years has limited US Dollar (USD) demand and prevented it from keeping AUD/USD lower.

Australian Dollar (AUD) Benefitting from Domestic Job Stats despite Global Trade Jitters

Demand for the Australian Dollar (AUD) has been a little more resilient since yesterday, despite the market’s anxiety around worsening US-China trade tensions and global growth slowdown fears.

This has been due to a number of both domestic and global factors, most recently including this week’s Australian job market stats. Australia’s latest wage growth and employment change stats both beat forecasts.

They offered the Australian Dollar support by bolstering hopes that Australia’s economy was resilient and that the Reserve Bank of Australia (RBA) would not need to be as dovish as feared on Australia’s economic outlook as a result.

This, combined with speculation that the Federal Reserve could become more dovish and the US economy could fall into recession, helped the Australian Dollar to avoid major losses against the US Dollar (USD).

Still, as China is Australia’s biggest trade partner, persisting US-China trade fears continue to weigh on the ‘Aussie’ outlook.

US Dollar (USD) Exchange Rates Steadying on Strong US Data

Market demand for the US Dollar (USD) has been mixed throughout the week as well. Like the ‘Aussie’, The US currency has also been hit by concerns that the domestic economy could be negatively affected by the US-China trade war.

On top of that, in the middle of the week US recession fears surged as the US yield curve inverted for the first time since 2007.

However, while these fears bubble away in the background and weigh on the US Dollar outlook, the currency found some more solid support to trade on following yesterday’s strong US data.

US retail sales and productivity both beat expectations according to yesterday’s prints. While US production data was disappointing, the strong retail data helped USD to steady against a recovering AUD and limit further AUD/USD gains.

Australian Dollar to US Dollar (AUD/USD) Exchange Rate Awaits Further Geopolitical Developments

Both the Australian Dollar (AUD) and US Dollar (USD) have been supported by domestic data but weakened by global trade jitters and recession fears over the past week.

With US-China trade relations still volatile and recession fears rising, these geopolitical factors are only likely to keep impacting currency movement.

As always, any optimistic trade developments or news from China is likely to bolster demand for the Australian Dollar, due to Australia’s strong trade relations with China.

Similarly, fears of the trade war hitting the US economy or deepening US recession fears would weigh on the US Dollar. This scenario would make it easier for AUD/USD to advance.

Looking ahead to next week, some notable Australian and US data could influence currency movement as well.

The Reserve Bank of Australia’s (RBA) latest meeting minutes could influence RBA interest rate cut bets on Tuesday. The Federal Reserve’s meeting minutes due on Wednesday could also be hugely influential for the Australian Dollar to US Dollar (AUD/USD) exchange rate.

Josh Jeffery

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