AUD/USD Exchange Rate Rangebound, Chinese Economic Woes Hold Back ‘Aussie’
The Australian Dollar US Dollar (AUD/USD) exchange rate held steady today, with the pairing currently trading around $0.683 after Chinese growth figures for the third-quarter eased from 6.2% to 6%, the slowest rate of expansion since 1993. As China represents Australia’s biggest trading partner, the country’s declining economic strength naturally weighs on market confidence in the ‘Aussie’.
Turo Nishihama, Chief Economist at Dai-Ichi Life Research Institute in Tokyo, commented:
‘The Chinese authorities must be taking the economic situation quite seriously. The U.S.-China trade war has worsened China’s jobs and wage situation and corporations also refrained from making capital investment… There is still a possibility that the trade friction between China and the United State would flare up again, which would put downward pressure on the Chinese economy.’
Meanwhile, US-China trade uncertainty continues to hold back the AUD/USD exchange rate, with China insisting the US lift tariffs before a final trade deal can be pushed through.
Despite ongoing global economic uncertainty, optimism for an Australian economic recovery increased following yesterday’s surprisingly upbeat speech from Philip Lowe, the Governor of the Reserve Bank of Australia (RBA).
Mr Lowe said, “[the economy] is actually gradually improving, the lower interest rates are working”, while also ruling out negative rates as being “extraordinarily unlikely”.
USD/AUD Exchange Rate Rangebound on Rising Fed Rate Cut Fears
The US Dollar (USD) failed to gain on the Australian Dollar (AUD) today following the release of weaker-than-expected US economic data, which showed US housing starts falling from a 12-year high in September, shrinking from 1.386 million to 1.256 million.
US markets expect the Federal Reserve to cut interest rates for the third time next month in efforts to maintain economic expansion and limit damage caused by the US-China trade war.
Chris Rupkey, Chief Economist at MUFG, New York, commented:
‘It inches them forward to taking out a little more insurance to help support the economy that continues to face the headwinds of reduced world trade from tariffs.’
US Dollar traders will be looking ahead to today’s speech by Richard Clarida, the Vice Chairman of the Board of Governors at the Federal Reserve. Any dovish comments about the US economy could drag on the USD/AUD exchange rate.
AUD/USD Outlook: US-China Trade Developments to Remain in Focus
‘Aussie’ traders will be looking ahead to a People’s Bank of China (PBoC) rate decision on Monday. A rate cut would deepen the current risk-off market and see the ‘Aussie’ sink against the US Dollar as more traders turn to safe-haven currencies.
US Dollar investors will focus on next Tuesday’s existing home sales figure for September which is forecast to ease from 5.49 million to 5.45 million. A downturn in property sales could feed into concerns for the US economy and put some pressure on the ‘Greenback’.
However, US-China trade developments will remain firmly in the driving seat for the AUD/USD exchange rate next week. Any signs of a consensus emerging between the world’s two largest economies could buoy risk-appetite and see the Australian Dollar rise.