Australian Dollar US Dollar (AUD/USD) Exchange Rate Rises Ahead of Fed’s Final Meeting of the Year
The Australian Dollar US Dollar (AUD/USD) exchange rate rallied by around 0.4%, leaving the pairing trading around $0.6837.
The US Dollar slipped against the ‘Aussie’ as markets waited for the US Federal Reserve’s final monetary policy meeting of the year.
After the bank completed a U-turn earlier in the year, abandoning its tightening cycle by slashing rates three times in 2019, policymakers are expected to leave rates on hold.
The Fed will likely leave rates on hold, and reiterate that interest rates will remain at the current level through the next year.
Meanwhile, Fed Chair, Jerome Powell is due to hold a news conference following the policy statement. His comments will round up a complicated year for the bank, in which Powell and his colleagues assessed how to approach President Trump’s confrontational and tariff-heavy approach to trade.
Australian Dollar (AUD) Edges Higher despite Heightened Job Loss Concerns
The Australian Dollar edged higher against the US Dollar despite data revealing consumer confidence slumped in December.
According to Westpac, concerns of job losses jumped to a two-and-a-half year high, weighing on confidence.
The survey of households showed that pessimists continued to outnumber optimists, with the index falling to 95.1.
Commenting on the data, Westpac economist, Bill Evans noted:
‘This poor performance of the index is broadly consistent with the sharp deterioration we saw in consumer spending in the September quarter as reported in the national accounts and the early evidence of weak retail conditions for the start of the December quarter.
‘The readings are consistent with a slowdown in jobs growth and steady increases in the unemployment and underemployment rates over the year ahead.’
Will President Trump Hit China With Further Tariffs?
Focus remains firmly on trade, as President Donald Trump has mere days to decide whether or not to slap almost $160 billion of Chinese consumer goods with tarriffs.
The move would not be well received in either the US or China, and would likely spark a decrease in risk appetite, weighing on AUD.
On Tuesday White House trade adviser Peter Navarro said President Donald Trump has the final say on tariffs.
Speaking with Fox Business Network, Navarro said:
‘Either way we’re going to be in a great place […] The president loves them [the tariffs].
‘If we get a great deal, we’ll be in a good place as well. But it will be the president’s decision. It will come soon.’
However, there continued to be no clarity on whether Trump will delay tariffs.
An anonymous source told Reuters that Washington was currently laying the groundwork for a delay, although a final decision has not been made. This likely provided an upswing of support for the ‘Aussie’.
The source also added that if the tariffs do take effect, discussions between Washington and Beijing are likely done for the remainder of President Trump’s term.
Australian Dollar US Dollar Outlook: Will US-China Trade Optimism Buoy AUD?
Looking ahead to this evening, the US Dollar (USD) could edge up against the Australian Dollar (AUD) if the US Federal Reserve are more optimistic than expected.
If the Fed comment on strong US data, and reiterate rates will remain at the current levels through 2020, ‘Greenback’ sentiment will rise.
Meanwhile, the ‘Aussie’ could rise on reports of US-China trade optimism. If traders become increasingly optimistic the US will avoid hitting China with further tariffs, risk appetite will rise and leave the Australian Dollar US Dollar (AUD/USD) exchange rate flat.