Australian Dollar to US Dollar (AUD/USD) Exchange Rate Remains Jittery with Fed Decision Hours Away

Australian Dollar to US Dollar Exchange Rate Fails to Sustain Recovery amid Stronger US Data

Updated 16:16 BST 18/09/2019:

Continued attempts for the Australian Dollar to US Dollar (AUD/USD) exchange rate to recover from its weekly lows have been limited, as the pair still trended just slightly above those lows at the time of writing on Wednesday afternoon.

Investors remained hesitant to buy the Australian Dollar (AUD) amid Reserve Bank of Australia (RBA) interest rate cut bets and weak Australian data.

Meanwhile, the US Dollar (USD) saw firm movement as investors highly anticipated the evening’s upcoming Federal Reserve policy decision.

US Dollar support was slightly strengthened in the afternoon by some stronger than expected US building permits and housing starts results from August.

Original post:

Australian Dollar to US Dollar Exchange Rate Struggles to Recover from Weekly Worst

Despite recovering risk and trade-sentiment in markets since yesterday, the Australian Dollar to US Dollar (AUD/USD) exchange rate has been unable to sustain much of a recovery from yesterday’s worst levels all week.

Following last week’s solid AUD/USD gains, the pair has essentially shed all those gains already this week.

AUD/USD opened this week at the interbank level of 0.68, and while the pair remains within this region it has shed almost half a cent and currently trends just above yesterday’s lows.

Due to this week’s rise in Reserve Bank of Australia (RBA) interest rate cut bets, as well as anticipation for tonight’s major Federal Reserve policy decision, investors have been hesitant to buy the Australian Dollar (AUD).

Australian Dollar (AUD) Exchange Rates Weighed by Reserve Bank of Australia (RBA) Concerns

Australian Dollar (AUD) investors remain anxious about rising Reserve Bank of Australia (RBA) interest rate cut bets in recent sessions.

The RBA published its latest meeting minutes report during yesterday’s Asian session, and notably indicated that it was prepared to keep easing monetary policy as necessary.

As a result, hopes of a more resilient or optimistic stance from the RBA lightened and bets of an interest rate cut from the bank in October rose.

This morning’s Australian leading index data from Westpac didn’t do much for the currency either, as the figure unexpectedly contracted at -0.3%.

Due to data weakening the Australian economic outlook, the currency has been unable to capitalise on a market recovery in risk and trade-correlated currencies since yesterday.

US Dollar (USD) Exchange Rates Firming with Federal Reserve in Focus

Yesterday’s mixed US data has only made investors even more anxious for this evening’s highly anticipated Federal Reserve policy decision.

US industrial production came in higher than forecast, but manufacturing production still disappointed by coming in with another yearly contraction in August.

Expectations that the Fed will cut US interest rates, and potentially even take a more dovish stance on US monetary policy, have made investors hesitant to sell the US Dollar (USD) ahead of the decision.

This is due to the risk of a more hawkish than expected bank.

The US Dollar has also been able to hold relatively firm ground amid this week’s chaotic global market developments.

While oil markets have since recovered slightly from the shock seen at the beginning of the week, the uncertainty following the weekend’s Saudi oil attack has kept the safe haven US Dollar broadly appealing.

Australian Dollar to US Dollar (AUD/USD) Exchange Rate Awaiting Big Federal Reserve Decision

Likely to be the biggest calendar event of the week for forex markets, the Federal Reserve will announce its anticipated September policy decision this evening.

The bank is widely expected to cut US interest rates, but it’s the tone the bank takes on the economic outlook and the possibility of further easing that will be particularly influential for currency movement.

If the Fed ramps up concerns about the health of the US economy or the possibility of a recession, Fed interest rate cut bets will rise further and the US Dollar (USD) will weaken.

This is the best chance AUD/USD has of recovering this week, as a more dovish Fed would also make risk-correlated currencies like the Australian Dollar (AUD) more appealing.

Still, Australian Dollar investors are eagerly awaiting not just the Fed news but also tomorrow’s Australian job market report.

If Australia’s job market is weaker than expected, the Australian Dollar to US Dollar (AUD/USD) exchange rate will struggle to recover amid Reserve Bank of Australia (RBA) interest rate cut bets.

Josh Jeffery

Contact Josh Jeffery


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