Expectations of Global Growth Boost Australian Dollar to US Dollar Exchange Rate
As the global growth outlook continues to rise, solid US data has not been enough to keep pressure on the Australian Dollar to US Dollar (AUD/USD) exchange rate – which has surged this week.
Despite strong US data and rising 2018 Federal Reserve interest rate hike bets, AUD USD has climbed from 0.7817 to a weekly high of 0.7986 this week.
During Friday’s European session the pair looked on track to end the week relatively near its highs and essentially reverse the losses seen last week.
Higher market expectations that global growth will continue to improve in 2018 and beyond has left the US Dollar (USD) less appealing, as market conditions become more favourable towards risk-correlated currencies.
As the global growth outlook has left investors more confident that major central banks will begin to tighten monetary policy in the coming years, the Australian Dollar (AUD) has benefitted.
Australian Dollar (AUD) Investors Anticipate Wage Data as Job Stats Meet Forecasts
Australia’s January job market report had little influence on the Australian Dollar when it was published on Thursday. The data largely met expectations and Australia’s economic outlook was generally unchanged as a result.
The participation and unemployment rates met expectations. Participation slipped from 65.7% to 65.6% while the unemployment rate came in at 5.5%.
The previous unemployment figure was revised to 5.6% but this has little impact on the market’s generally optimistic view of Australia’s job market.
January’s employment change figure slipped from 33.5k to 16, close to the forecast 15k.
Overall, investors were unsurprised by the latest job data and with Australia’s Q4 wage results due for publication next Wednesday investors have been moving more on US Dollar weakness and global growth news.
US Dollar (USD) Exchange Rates Fail to Benefit from US Data
US data published in recent sessions has been largely brushed over by US Dollar investors, despite much of the data indicating that the US economy is seeing strong performance.
For example, Wednesday’s US Consumer Price Index (CPI) came in higher than expected in all major prints and left markets more confident that the Federal Reserve would hike US interest rates at least 3 times in 2018.
This was followed on Thursday by January’s US PPI stats, which also beat market expectations and added further evidence that price pressures were building in the US.
However, other US data in recent sessions has disappointed. US retail sales fell short of expectations in Wednesday’s data and industrial production contracted month-on-month according to Thursday’s report.
Australian Dollar to US Dollar (AUD/USD) Forecast: Australian Wage Stats Ahead
Next week’s US economic calendar will be quieter, but with the US Dollar’s recent broad weakness largely unfazed by strong US data the Australian Dollar to US Dollar (AUD/USD) exchange rate is more likely to be influenced by Australian data and US Dollar weakness regardless.
Australian Dollar investors are looking ahead to Tuesday’s session, when the Reserve Bank of Australia (RBA) will publish its latest meeting minutes.
If the bank shows any signs of a change in tone, particularly any hawkishness, RBA interest rate hike bets could rise and the Australian Dollar could strengthen.
Investors are also highly anticipating Australian wage data from Q4 2017, due for publication on Wednesday. The RBA has expressed concern about persistently low wage growth in Australia.
As for US data, next Wednesday will see the publication of Markit’s US PMI projections for February, and January’s existing home sales results. Jobless claims data will be published on Thursday.
Besides that, the Australian Dollar to US Dollar (AUD/USD) exchange rate will likely continue to be driven by risk-sentiment in the market and global growth expectations.