Australian Dollar US Dollar (AUD/USD) Exchange Rate Muted as China Plans to Halve Tariffs
The Australian Dollar US Dollar (AUD/USD) exchange rate remained flat on Thursday, leaving the pairing trading at around $0.6749.
The Australian Dollar remained under pressure this morning after data showed retail sales dropped in December.
Australian shoppers were put off spending thanks to ongoing bushfires. This caused Aussie retailers to suffer their worst month in close to two-and-a-half years in the final month of 2019.
However, the unexpected news that China would halve tariffs on some US imports provided the ‘Aussie’ with support.
In a goodwill gesture, Beijing said the move could avoid any major economic shock from the outbreak of the Wuhan coronavirus.
This came amid an upswing in risk appetite as investors began to bet on the virus being a short-term shock despite the growing death toll.
Commenting on this, head of markets strategy at Westpac, Robert Rennie said:
‘Any news along these lines is good news. It adds to the sense that there’s a number of policies both domestically and globally which could help to mitigate the impact of coronavirus.’
US ISM Non-Manufacturing PMI Jumps to Five Month High
On Wednesday, data showed the US service sector picked up at the start of 2020. This suggests the economy will continue to grow despite slowing consumer spending.
The Institute for Supply Management (ISM) revealed its non-manufacturing PMI increased to a better-than-expected 55.5.
This rebound in manufacturing followed five consecutive months of contraction and was the highest level since August. This boosted the Dollar as this is the US Federal Reserve’s preferred PMI measure.
Meanwhile, Markit’s PMI also showed business activity picked up in the services sector, rising to a 10-month high.
Commenting on Wednesday’s data, Markit’s Chief Business Economist, Chris Williamson said:
‘The PMI data indicate that the US economy is ticking along at a steady but unspectacular annualized rate of growth of approximately 2% at the start of 2020. Growth has gained some momentum from the lows seen in the fall as the service sector enjoys stronger growth and manufacturing has also shown signs of the trade-led downturn easing. However, factory activity remains worryingly remains subdued, and optimism about future growth across the business community as a whole continues to run at one of the lowest levels seen over the past decade.’
However, the rise in risk appetite this morning supported AUD, and left the pairing flat.
Australian Dollar US Dollar Outlook: US Non-Farm Productivity in Focus
Looking ahead, the US Dollar (USD) could rally against the Australian Dollar (AUD) following the release of nonfarm productivity data.
If flash Q4 productivity data jumps higher than expected, it will buoy the ‘Greenback’.
Meanwhile, the ‘Aussie’ is likely to slump following the Reserve Bank of Australia’s (RBA) monetary policy statement.
If the bank highlights the risks to the Australian economy and the ongoing issue of high unemployment, the Australian Dollar US Dollar (AUD/USD) exchange rate will slide.