Doubts Over US-China Trade Agreement Prompt Australian Dollar US Dollar (AUD/USD) Exchange Rate Wobble
The bullishness of the Australian Dollar to US Dollar (AUD/USD) exchange rate faltered this morning as confidence in the prospect of an imminent US-China trade agreement faded.
In spite of continued optimistic comments from the White House markets saw the odds of a trade breakthrough fade ahead of the weekend.
Reports suggesting that Chinese officials have doubts over the two sides’ ability to reach a full trade agreement left investors with little cause for confidence.
A sharper-than-expected easing of the third quarter Australian producer price index also put a dampener on the Australian Dollar (AUD).
Weaker US Jobs Growth to Limit USD Exchange Rate Upside
Support for the US Dollar (USD) could see a fresh deterioration this afternoon if October’s non-farm payrolls report fails to impress.
Forecasts point towards a headline payrolls figure of just 89,000, suggesting that the US labour market is struggling to tighten further.
If the accompanying unemployment rate result picks up from 3.5% to 3.6% as expected this could case fresh doubt over the health of the world’s largest economy.
A weaker labour market could encourage the Federal Reserve to return to a dovish bias in the months ahead, raising the odds of further interest rate cuts to come.
However, as wage growth is expected to strengthen to 3% on the year this could help to limit the downside pressure on USD exchange rates.
Increasing Signs of RBA Dovishness May Drag AUD Exchange Rates Lower
The mood towards the Australian Dollar looks set to sour as the Reserve Bank of Australia’s (RBA) November policy meeting approaches.
As RBA policymakers have shown increasing signs of cautiousness over the economic outlook in recent weeks markets see a greater risk of dovishness at Tuesday’s meeting.
If the central bank appears to be shifting its neutral policy bias the increasing odds of future monetary loosening are likely to weigh heavily on AUD exchange rates.
Weakness may also be in store for the Australian Dollar if market risk appetite deteriorates further over the coming days.
As long as global trade tensions persist the AUD/USD exchange rate looks set to remain under pressure, given the negative impact that the slowdown is already having on the Australian economy.
Faltering US Factory Orders Forecast to Weigh on US Dollar
With US factory orders expected to show a fresh deterioration on the month in September the US Dollar may struggle to find any positive footing on Monday.
Fresh evidence of a deterioration in US economic activity may drag USD exchange rates lower once again, adding to the pressure on the Federal Reserve.
However, a stronger showing from the latest ISM New York index could help to put a floor under the US Dollar at the start of the week.
An uptick in the business conditions survey would ease market worries over the underlying strength of the world’s largest economy.
If the index falls deeper into negative territory, though, this could offer the AUD/USD exchange rate a fresh rallying point.