Australian Dollar US Dollar (AUD/USD) Exchange Rate Steady on Renewed Hopes of US-China Trade Deal

AUD/USD Exchange Rate Rangebound despite Downbeat Australian Consumer Confidence

The Australian Dollar US Dollar (AUD/USD) exchange rate held steady today, with the pairing currently trading around $0.674 despite October’s Australian Westpac consumer confidence index falling to a four-year low of -5.5%.

Bill Evans, Chief Economist at Westpac, was downbeat in his analysis:

‘Issues that may also be unnerving consumers include the debate around the lack of response of fiscal policy to the deteriorating outlook; the banks’ partial pass through to the standard variable mortgage rate of the recent official rate cut; and the realisation amongst Australians that wage growth is likely to remain stuck at a modest 2 per cent a year or less for the foreseeable future.’

The risk-sensitive ‘Aussie’ steadied against the US Dollar on renewed US-China trade talk hopes spurred by Chinese purchases of US agricultural goods, US tariff delays and propitious comments from President Donald Trump in which he claimed ‘[a deal] could happen sooner than you think’.

However, analysts at TD Securities urged caution:

‘The incentive for both sides to get a deal done is intensifying given rising economic pressures on both countries. However, the two sides remain far apart on various structural issues.’

The AUD/USD exchange rate could benefit from increased risk-appetite if the two superpowers compromise on a workable trade deal in the next few days.

USD/AUD Exchange Rate Holds Steady on Increasing Odds for Fed Rate Cut

The US Dollar (USD) remains unmoving against the Australian Dollar (AUD) as US investors sit on their hands ahead of today’s speech by Federal Reserve Chairman, Jerome Powell. With the odds for a rate decrease rising to 80%, market confidence in the ‘Greenback’ has naturally diminished.

Today will enable Mr Powell to correct any misconceptions following yesterday’s speech, but if he fails to rule out a rate cut, or remains dovish on the US economy, we could see the USD/AUD exchange rate ease.

Today’s Federal Open Market Committee’s (FMOC) minutes could also shed light on the bank’s policy plans, with less dovish comments likely to lower the odds of a rate cut and buoy market confidence in the US Dollar.

AUD/USD Outlook: Could ‘Aussie’ Rise on US-China Trade Deal Compromise?

‘Aussie’ (AUD) traders will focus on tomorrow’s Australian home loans figure for August and the Australian consumer inflation expectations figure for October, with the latter expected to improve from 3.1% to 3.2%.

Meanwhile, US Dollar (USD) investors will turn their attention to the release of September’s inflation figure, which is expected to rise by 0.2% on the month, with a year-on-year figure forecast to hold steady at 2.4%.

US-China trade developments will continue to drive the AUD/USD exchange rate for the rest of the week, with any signs of a compromise between the world’s two largest economies likely to boost risk-appetite for the Australian Dollar.

David Moore

Contact David Moore