Australian Dollar to US Dollar Exchange Rate Recovers Most of November’s Losses
Investors sold the US Dollar (USD) in reaction to poor US data yesterday, and due to a lack of fresh dovishness from the Reserve Bank of Australia (RBA) the Australian Dollar to US Dollar (AUD/USD) exchange rate has been able to sustain solid gains.
After tumbling throughout most of November and touching on a monthly low at the end of last week, AUD/USD has been trending with an upside bias since markets opened yesterday.
AUD/USD opened this week at the interbank level of 0.67 and has climbed almost a cent since then, trending near a three week high in the region of 0.68 at the time of writing on Tuesday.
It follows weeks of losses throughout November, but since last night AUD/USD has quickly rebounded to levels not seen since early-November.
This is due largely to the poor US manufacturing data published yesterday, but the Australian Dollar (AUD) has also benefitted from the latest Reserve Bank of Australia (RBA) news.
Australian Dollar (AUD) Exchange Rates Strong on Reserve Bank of Australia (RBA) News
The trade and risk-correlated Australian Dollar (AUD) has seen stronger demand this week so far, as a combination of Australian economic hopes and weakness in the currency’s rivals leave it more appealing.
Recent Australian data has been mixed, but signs that the global growth slowdown is finally coming to an end, combined with strong Chinese manufacturing data, softened dovish Reserve Bank of Australia (RBA) speculation.
On top of this, the RBA’s December policy decision, which took place this morning, showed that the bank was not as dovish as markets expected.
The bank left the door open for more potential monetary policy easing in the next year, but didn’t signal strongly when the next rate cut could be.
Some investors expected the bank to hint more strongly at rate cuts, so the bank’s shift away from Australian economic concerns to global trade concerns was seen as a sign that Australia’s economy could steady.
While the Australian Dollar was hit by fresh concerns that the US and China may not reach a trade deal for another year, this news also negatively impacted the US Dollar (USD) and AUD/USD sustained most of the past day’s gains.
US Dollar (USD) Exchange Rate Hit by Weak US Data and Trade War Fears
Weeks of resilient strength in the US Dollar (USD) appeared to come to an end yesterday, as a combination of US-China trade jitters and a concerning US manufacturing report sent the currency plunging.
The US Dollar, already vulnerable on speculation of worsening US-China trade relations, was hit hard when ISM’s November US manufacturing PMI was published yesterday, showing that the US manufacturing sector was contracting more than expected.
ISM’s manufacturing PMI worsened from 48.3 to 48.1 rather than improving to the forecast 49.2. It worsened concerns that the US factory sector could see a recession.
Then today, US-China trade relations appeared to take a turn for the worse as US President Donald Trump suggested it could be better to wait until after the 2020 US Presidential Election to complete a US-China trade deal.
Distinct lack of urgency from Trump vis-a-vis US, China trade deal, suggests tariffs could well kick in on December 15th.
About that phase one trade deal?
— Michael Hewson 🇬🇧 (@mhewson_MCH) December 3, 2019
This worsened concerns that the trade war could worsen as new tariffs are implemented, which may further hurt the US economy.
Australian Dollar to US Dollar (AUD/USD) Exchange Rate Anticipates Major Wednesday Data
Amid worsening US-China trade war fears, the Australian Dollar (AUD) and US Dollar (USD) could both see increasingly volatile movement on trade jitters.
The Australian Dollar to US Dollar (AUD/USD) exchange rate may be able to hold its recent gains more easily if the Australian Dollar finds more support that improves Australia’s economic outlook, however.
Even more influential Australian and US data will be published throughout Wednesday’s session. Australian services PMI data and Q3 growth rate results will be closely watched by AUD investors during the Asian session.
If Australian growth beats forecasts, it could boost hopes that Australia’s economy is resilient amid the trade war and could soften Reserve Bank of Australia (RBA) interest rate cut speculation.
The US Dollar, pressured by US recession and trade war concerns, could be influenced by ISM’s non-manufacturing PMI data tomorrow.
Of course, any surprising developments in US-China trade relations or risk-sentiment in general could also cause Australian Dollar to US Dollar (AUD/USD) exchange rate movement.