Australian Dollar US Dollar (AUD/USD) Exchange Rate Slides on Dovish RBA
The Australian Dollar US Dollar (AUD/USD) exchange rate slumped on Tuesday, leaving the pairing trading at around AU$0.6847.
The Australian Dollar fell as the Reserve Bank of Australia (RBA) left the door open to further rate cuts as soon as February.
In the minutes from the bank’s December meeting, policymakers were concerned with weak wage growth.
If weak growth means inflation or consumption is unable to boost depressed household incomes, the bank will introduce further measures.
The minutes showed the RBA was ‘prepared to ease monetary policy further if needed’.
The minutes revealed:
‘Members agreed that it would be important to reassess the economic outlook in February 2020, when the Bank would prepare updated forecasts. As part of their deliberations, members noted that the Board had the ability to provide further stimulus to the economy, if required.’
Meanwhile, commenting on the effect this had on the pairing, in a note, analysts at Mizhou Bank wrote:
‘The minutes of the Reserve Bank of Australia’s meeting clearly kept the door open for further easing. The dovish tone of the RBA should lead to a softer AUD/USD.’
US Dollar (USD) Rallies as US-China Deal ‘Absolutely Completed’
While the news of a preliminary US-China trade agreement boosted prospects of economic growth in 2020, the ‘Aussie’ fell.
On Monday, a top White House adviser said the ‘phase one’ trade deal has been ‘absolutely completed’, boosting the US Dollar.
Speaking to reporters at the White House, National Economic Council Director Larry Kudlow said:
‘Make no mistake about it: the deal is done, the deal is completed. The deal is absolutely completed.’
US exports to China will double under the deal, although Chinese officials have remained cautious emphasising the trade tensions have not been completely settled.
Kudlow noted that officials will sign the deal in the first week of January, and translations are being worked out. He also added that he did not expect there to be any further changes to the ‘phase one’ deal.
Australian Dollar US Dollar Outlook: Will Weak Industrial Production Weigh on USD?
Looking ahead to this afternoon, the US Dollar (USD) could slump against the Australian Dollar (AUD) following the release of industrial production data.
If US industrial production slumps further than expected in November, ‘Greenback’ sentiment will slide.
Meanwhile, a further increase in US-China trade optimism could provide the ‘Aussie’ with an upswing of support.
If there is a clear date for US and Chinese officials to sign the ‘phase one’ deal, the Australian Dollar US Dollar (AUD/USD) exchange rate will rally.