Australian Dollar US Dollar (AUD/USD) Exchange Rate Muted, Aussie Confidence Nears Five-Year Low
The Australian Dollar US Dollar (AUD/USD) exchange rate remains muted today and is currently trading around $0.6858.
Australian business confidence dropped to a five-year low, leaving the ‘Aussie’ under pressure on Tuesday morning.
Disappointing business sentiment from the National Australia Bank (NAB) suggested tax relief and interest rate cuts were failing to breathe life into the slowing Australian economy.
Commenting on the data, NAB chief economist, Alan Oster said:
‘It looks like the tax cuts have had little impact on household consumption or have not been large enough to offset increasing weakness.
‘The two rate cuts also may have had little impact, though this is expected with the longer and more variable lags of monetary policy.’
US Dollar (USD) Flat Ahead of Next Week’s Federal Reserve Rate Decision
The US Dollar (USD) was left under pressure ahead of next week’s Federal Reserve interest rate decision.
Investors anticipate a Fed rate cut after the central bank cited weak inflation for their decision to slash rates in July.
August data revealed US consumer inflation expectations slumped to a fresh low and US workers were increasingly pessimistic about their jobs, fearing unemployment could remain at a 50-year low.
However, with strong consumer spending and low unemployment, policymakers remain divided over the need for a rate cut.
Australian Dollar (AUD) Fluctuates as Chinese Inflation Under Bank’s 3% Target
The risk-sensitive Australian Dollar (AUD) was left fluctuating as data revealed a contraction in Chinese factory-gate prices.
Despite China’s Consumer Price Index (CPI) rising by a higher-than-forecast 2.8%, it still remained below the central bank’s target of around 3%.
This comes after the People’s Bank of China (PBoC) slashed reserve requirements in order to free up money for lending.
Commenting on this, ANZ noted:
‘Despite the higher CPI, we expect the People’s Bank of China (PBoC) to cut interest rates in the fourth quarter this year.
‘China’s declining Producer Price Index (PPI) carries more weight with policymakers in their monetary policy decisions, in our view.’
Australian Dollar US Dollar (AUD/USD) Outlook: AUD to Fall on Disappointing Consumer Confidence
Looking ahead to the start of Wednesday’s Asian session, the Australian Dollar to US Dollar (AUD/USD) exchange rate could slip if Westpac’s Consumer Confidence Index (CCI) slides further than forecast.