Widened Trade Surplus Fails to Boost Australian Dollar US Dollar Exchange Rate
A surprise widening of December’s Australian trade surplus was not enough to keep the Australian Dollar to US Dollar (AUD/USD) exchange rate from slumping today.
While the surplus widened from A$5.01 billion to A$6.78 billion at the end of 2020 this failed to encourage any particular demand for the Australian Dollar (AUD).
This was in large part due to the nature of the trade data, with the increase in the headline trade balance fuelled by a decline in imports rather than higher export figures.
All in all, this suggests that the Australian economy remains under a degree of pressure thanks to global trade disruption in the face of the ongoing Covid-19 crisis.
Lower Initial Jobless Claims Figure Shores up USD Exchange Rates
On the other hand, the mood towards the US Dollar (USD) improved sharply in the wake of a better-than-expected initial jobless claims figure.
While jobless claims remained at a historically elevated level investors were still encouraged to see that their recent spike has continued to lose some of its momentum.
With a smaller number of initial jobless claims made in the last week than anticipated worries over the health of the labour market diminished somewhat, offering USD exchange rates a solid boost.
A stronger uptick in December’s factory orders figure also helped to lift demand for the US Dollar against its rivals, capitalising on weakened market risk appetite.
US Dollar Looks for Additional Boost on Non-Farm Payrolls Report
Support for USD exchange rates could strengthen further ahead of the weekend if January’s overall non-farm payrolls report shows a similar improvement.
Evidence of a wider recovery in the labour market could see the US Dollar extending its gains across the board, even though the pandemic still looks set to weigh on the economy for some time to come.
If the headline unemployment rate holds steady at 6.7% this may help to keep a floor under USD exchange rates in the near term.
However, a weaker reading from the corresponding participation rate could well put a dampener on the US Dollar as a lower number of Americans remain active within the labour market.
Dovish RBA Monetary Policy Statement May Drag Australian Dollar Lower
The Australian Dollar could struggle to capitalise on any renewed US labour market jitters tomorrow, though, thanks to the release of the Reserve Bank of Australia’s (RBA) statement on monetary policy.
After the RBA’s surprise decision to expand its quantitative easing programme at Tuesday’s policy announcement investors remain wary of the potential for a dovish statement.
If policymakers express greater anxiety over the outlook of the Australian economy this could easily leave the Australian Dollar on the back foot ahead of the weekend.
As long as markets see reason to bet that the central bank will maintain a dovish policy bias for the foreseeable future the possibility of any AUD exchange rate rally looks set to remain muted.