News that US President Trump plans to detail his US taxation reforms in the coming weeks has weakened demand for the risky Australian Dollar to US Dollar exchange rate.
A slowing in Japan’s Q4 2016 Gross Domestic Product outlook has also weakened demand for the ‘Aussie’ as Japan is a major trading partner.
As a result of these downsides, last week’s optimistic Reserve Bank of Australia (RBA) news has not continued to benefit the Australian Dollar.
The Australian Dollar to US Dollar exchange rate trended flatly around 0.76 with a downside bias when markets opened on Monday despite a solid recovery at the end of last week.
Over in the US, a lack of fresh supportive factors have prevented the US Dollar from benefitting from the latest drop in risk-sentiment.
Friday’s Michigan University consumer sentiment report dropped further than expected, from 98.5 to 95.7, indicating that US citizens were not as confident in the second month of the Trump Presidency as expected.
While the US Dollar is likely to benefit from Trump’s upcoming tax reform news, investors focused on US stocks when markets opened this week, slowing the US Dollar advance.
Besides any developments from US President Trump in terms of upcoming policies, Tuesday and Thursday are set to be the most influential sessions this week for the Australian Dollar to US Dollar exchange rate.
Australian Dollar traders will be particularly focused on Thursday’s upcoming Australian unemployment results. If these disappoint traders, hopes of further hawkishness from the Reserve Bank of Australia (RBA) will fade.
Before that, the NAB Australian business confidence results from January will be published during Tuesday’s Asian session. This could support the ‘Aussie’ modestly if it impresses traders.
However, the US Dollar is more likely to take focus in upcoming AUD USD movement as risk-sentiment is likely to remain weak on poor Asian data and Trump jitters.
December’s US trade deficit update is due to come in on Tuesday and could give the US Dollar a boost if it lightens further than expected. This is because President Trump has indicated that his administration will focus on eliminating the US deficit.
As always, prices of Australia’s primary commodity export, iron ore, will also influence demand for the Australian Dollar this week.
Iron ore prices have defied expectations and remained considerably strong over the weekend. However, falls in iron ore prices will cause the Australian Dollar to become even weaker than it has been so far this week.