Australian Dollar to US Dollar Exchange Rate Fluctuates as Trade War Concerns Persist
The recent trend of wide fluctuations in the Australian Dollar to US Dollar (AUD/USD) exchange rate may be set to continue this week, as trade uncertainties continue to weigh on both currencies with no perceived end in sight.
Last week saw AUD/USD slip just slightly, from the level of 0.7680 to 0.7673. Since markets opened this week, AUD/USD has fluctuated within a tight region between highs of 0.7695 and lows of 0.7653.
Investors of both the Australian Dollar (AUD) and the US Dollar (USD) have been largely focused on the ongoing tit-for-tat between the US and China regarding trade tariffs.
Efforts from the US Presidential administration to keep markets calm have been largely ineffective, as the Presidency continues to take a strict tone against China too.
On Monday, it was reported that China may be studying the effects of a potential devaluation in the Chinese Yuan (CNY). According to sources close to the situation, this could become part of China’s trade action against the US.
The news worsened ‘trade war’ jitters which weighed on the US Dollar, but as China is Australia’s biggest trade partner it weighed on the ‘Aussie’ too and left both currencies volatile.
Australian Dollar (AUD) Exchange Rates Find Little Support in Australian Data
Despite stronger Australian ecostats over the last week, the data has done little to make the Australian Dollar more appealing amid the persistent trade jitters keeping investors hesitant to buy the risky trade-correlated currency.
Monday saw the publication of Australia’s March construction PMI from AiG, which improved from 56.0 to a strong 57.2.
It followed last week’s Australian services PMI, which improved from 54.0 to 56.9, as well as some strong February retail sales stats.
The February rebound in Australian retail sales bolstered market hopes that Australian household activity was improving following months of subdued activity.
Still, the data has not been able to make the Australian Dollar a notably more appealing buy and the currency continues to be pressured by ‘trade war’ fears.
US Dollar (USD) Exchange Rates Mixed as US Data Fails to Impress
Last week’s US data was largely disappointing and gave investors little reason to buy the US Dollar.
Without strong support from US ecostats, US Dollar trade was left to be influenced by developments in US and China trade news.
Friday saw the publication of March’s US Non-Farm Payroll results, which disappointed investors in many major prints.
The headline Non-Farm Payrolls print only came in at 103k, well below the forecast 193k and the previous figure of 326k.
The key unemployment rate failed to improve to 4% as forecast, instead remaining at 4.1%. The participation rate unexpectedly slipped from 63% to 62.9%.
While US average wages ticked slightly higher than expected month-on-month, this was not enough to impress investors amid the other disappointing US job stats.
US PMI data also fell short of forecasts last week. Overall the data gave dovish investors little reason to believe that the Federal Reserve would ramp up the pace of 2018 interest rate hikes.
Australian Dollar to US Dollar (AUD/USD) Forecast: Australian or US Data Could Influence Movement
As US-China trade jitters continue to cause fluctuations in both the Australian Dollar and the US Dollar, domestic data may be more likely to influence direction in AUD/USD than trade developments.
Tuesday’s Asian session will see the publication of Australia’s March business confidence survey data from the NAB, which is currently forecast to have improved from 9 to 12.
Wednesday will follow with Westpac’s April consumer confidence survey data, followed later by a speech from Reserve Bank of Australia (RBA) Governor Philip Lowe.
The upcoming US data is even more likely to be influential, as key US Consumer Price Index (CPI) stats from March will be published during Wednesday’s American session.
US inflation is forecast to have slowed from 0.2% to a stagnant 0% month-on-month, but have risen from 2.2% to 2.4% year-on-year.
Core inflation is also expected to have risen year-on-year. If US core inflation beats expectations, AUD/USD could fall as Federal Reserve interest rate hike bets increase.
Speaking of the Fed, the Federal Open Market Committee’s (FOMC) latest meeting minutes will be published during Wednesday’s American session too.