The US Dollar to Australian Dollar exchange rate plunged on Thursday as investors indulged in risk-correlated currencies like the ‘Aussie’ after the disappointment that was Donald Trump’s first press conference since being elected as US President. USD/AUD has lost over three cents since markets opened on Monday and on Thursday the pair hit a three-week-low of 1.33.
US Dollar (USD) Sold off Following Scandal-Filled Trump Press Conference
Demand for the US Dollar has been solid in recent weeks as investors have been highly excited about the prospect of US President-elect Donald Trump’s proposed fiscal policies and how it may bolster the US economy in the short to mid-term.
However, as Trump’s inauguration on the 20th of January approaches and traders hope for more clarity on his economic plans, Wednesday’s press-conference was widely disappointing and left the ‘Greenback’ weaker across the board.
Markets had hoped for some discussion of Trump’s economic proposals, in hopes that more clarity would be offered.
The press conference was instead largely focused on the past week’s media storm of allegations that Trump was potentially involved with Russian attempts to interfere with the US election last year.
Australian Dollar (AUD) Bolstered by Extended Risk-Rally and Iron Ore Prices
The Australian Dollar, on the other hand, has been one of the week’s best performing currencies thus far. The ‘Aussie’ was resilient in the face of dropping iron ore prices at the beginning of the week but was there to ride the wave when prices of the commodity surged again.
Iron ore, Australia’s most lucrative commodity, was expected to plummet from 2016’s gains in early 2017. However, soon after the predicted fall began over the weekend, iron ore prices defied expectations and surged back up again in the middle of the week.
Iron ore prices have held above the key level of US$80 per tonne, and Chinese iron ore futures continued to rise on Thursday.
The ‘Aussie’ also saw extended demand from Wednesday’s Trump-influenced USD selloff. With investors lacking the clarity they want on the US economic outlook, they moved towards riskier currencies like AUD. This saw the week’s risk rally extend right up to Friday.
US Dollar to Australian Dollar Forecast to Recover from Lows if Risk-Sentiment Fades
While the US Dollar to Australian Dollar exchange rate is unlikely to see a significant recovery before the weekend, it could at least emerge from its worst levels if this week’s risk-rally draws to an end and US data impresses investors.
Friday will see the publication of various influential US ecostats, including December’s advance retail sales results and the University of Michigan’s preliminary January confidence index.
Other stats due on Friday include US November business inventories and December PPI figures. These reports are unlikely to dissuade the disappointment felt in markets from Trump’s rhetoric this week.
USD/AUD will only see a significant recovery before the weekend if a risk-off rally begins. Investors want most to see clarity on the US economic outlook once Trump takes office, so hawkish statements from the Fed or preferably Trump himself would lead traders back to the ‘Greenback’.
As for the Australian Dollar, it will inevitably slip slightly from its current highs after almost a week of rallying if investors decide to engage in profit taking, or if prices of iron ore begin to fall.
No influential Australian ecostats are due for publication until next week’s home loans and consumer confidence reports, leaving USD/AUD to be largely influenced by risk-sentiment for the remainder of this week’s trade.