Trade War Fear Keeps Australian Dollar to US Dollar (AUD/USD) Exchange Rate Pressured

Australian Dollar to US Dollar Exchange Rate Struggling to Hold Ground despite China’s Positive Tone

A brief rise in hopes that China wishes to keep working to resolve the US-China trade war was not enough to help the Australian Dollar to US Dollar (AUD/USD) exchange rate to make a notable recovery today.

AUD/USD rebounded slightly from a downtrend this morning, but the pair still trends within the interbank region of 0.67, just below the week’s opening levels.

AUD/USD has been able to hold above the decade low of 0.66 seen at the beginning of the week.

Australian Dollar (AUD) demand remains limited though, as this week’s Australian data has been underwhelming and Reserve Bank of Australia (RBA) interest rate cut speculation persists.

Australian Dollar (AUD) Exchange Rates Pressured by Australian Economic Jitters

China is Australia’s biggest trade partner, so the trade-correlated Australian Dollar (AUD) has been buoyed slightly by China’s latest trade comments.

China has indicated it will not immediately retaliate to the latest US tariffs this weekend, and will instead seek a resolution to the trade war. This led to a limited boost in risk-sentiment.

However, the Australian Dollar was unable to capitalise on this news due to other factors weighing on the currency.

Australian data published in recent sessions has been disappointing, worsening concerns about Australia’s economic outlook amid poor data and the trade war. Reserve Bank of Australia (RBA) interest rate cut bets have also risen.

This morning’s Australian private capital expenditure data contracted at -0.5% rather than the expected 0.5%, while new home sales fell at -7.2%.

US Dollar (USD) Exchange Rates Fail to Hold Best Levels amid Economic Concerns

The US Dollar (USD) has been unable to hold its best levels against the Australian Dollar (AUD), as the latest US-China trade developments and persisting US recession fears leave the currency’s appeal highly mixed.

The US Dollar is a safe haven currency, but amid expectations for the US economy to be hit by the US-China trade war the currency has been unable to capitalise on safe haven demand.

This week’s US data has been mixed so far as well, offering the US currency no solid demand. As the US yield curve inversion has deepened, US recession speculation persists and is also keeping pressure on the US Dollar.

The Federal Reserve has been less dovish than expected on its monetary policy plans, but the boost this gave to the US Dollar at the beginning of the week was mixed amid these other factors weighing on the currency.

Australian Dollar to US Dollar (AUD/USD) Exchange Rate Investors Await Trade News and US Data

The US Dollar’s (USD) movement has been mixed this week amid US-China trade war uncertainties, Federal Reserve speculation and low influence US data, but the currency could take focus in Australian Dollar to US Dollar (AUD/USD) exchange rate movement before the end of the week.

Major US ecostats will be published through the end of the week, starting with today’s US Gross Domestic Product (GDP) growth rate projection from Q2.

If US growth beats forecasts, US recession fears could lighten and the US Dollar would strengthen.

US PCE inflation data, due tomorrow, could also bolster the US Dollar if it beats forecasts. Stronger than expected PCE data would soften Federal Reserve interest rate cut speculation.

A stronger US Dollar may put AUD/USD closer to its worst levels in years, but the Australian Dollar (AUD) may not find much support in the coming sessions unless US-China trade relations improve.

China has reportedly taken more of a positive stance, and if this continues or bears fruit the trade-correlated ‘Aussie’ could strengthen, helping the Australian Dollar to US Dollar (AUD/USD) exchange rate to advance.

Josh Jeffery

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