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AUD USD Exchange Rate Flat as US Dollar Awaits Release of Non-farm Payrolls Data

US Dollar Exchange Rates

Strong Chinese trade data today put a floor under the Australian Dollar US Dollar currency paring.

The AUD USD exchange rate is currently trending flatly, with the ‘Greenback’ kept soft by the approach of one of the most vital US data releases to feature on the economic calendar.

Strong Chinese Imports Defy Economists’ Forecasts, Boosting Australian Dollar (AUD)

The latest Chinese trade data has shown that demand continued to hold up in the Asian superpower, with imports continuing to grow rapidly despite forecasts of a slowdown.

Import growth edged up from 17.2% to 17.7% year-on-year, against predictions of a slowdown to 13% from economists.

This boded well for the performance of Australian exporters during November, helping to improve sentiment after October’s dire Australian trade balance figures showed that the surplus collapsed from A$1.6 billion to just A$105 million.

While Chinese imports of coal only crept slightly higher, manufacturers imported nearly 140,000 tonnes more copper on the month and around 15 million tonnes more iron ore.

This is good news for the Australian commodities sector, who would have produced much of these raw materials demanded by Chinese companies.

Mineral imports had been expected to slow as the Chinese government launches a crackdown on pollution and unsustainable debt, both of which threaten to shut down a number of factories operating in China – some of them illegally.

Approach of US Non-Farm Payrolls Data Keeps US Dollar (USD) Soft

Key US labour market data is set for release soon and its approach is keeping markets wary of the US Dollar until the outcome of the report is known.

Non-farm payrolls reports are one of the most influential releases on the US data calendar, so a poor result here could shake the odds of an interest rate hike from the Federal Reserve at next week’s monetary policy meeting.

With odds of a hike to 1.50% having held above 90% for weeks now, it is unlikely that one poor performance from the non-farm payrolls report could undermine confidence in monetary tightening this month.

However, a poor result would dampen hopes of further normalisation starting next year – with markets taking this year’s hike as virtually a given, the issue of whether it will be followed up by further tightening could weigh on USD.

Additionally, markets remain unsettled by President Donald Trump’s recent decision to officially recognise Jerusalem as the capital of Israel, which sparked intense international backlash and threatened to destabilise peace efforts in the region.

Weakness for AUD USD Exchange Rate Forecast if US Labour Market Data Prints Strongly

There is no Australian data set for release until next week, although there are plenty of developments on the global economic calendar to keep volatility high for AUD.

Today’s labour market data includes not only the non-farm payrolls report, but also the unemployment rate for November.

Average weekly earning’s figures will also have an impact, given that strong wage growth bodes well for inflation, while the University of Michigan sentiment index for December is expected early tomorrow morning.

Progress continues on the reconciliation of the two tax bills approved by the House of Representatives and the Senate, which would allow Trump to implement the largest set of reforms to the US tax system seen in three decades.

The different bills passed by the House and the Senate vary greatly in the reforms they have approved and the timeline for implementing the changes – lawmakers now have until a self-imposed 22nd December deadline to reconcile to two bills into something that can receive final approval.

Signs that progress is happening here will cause further headwinds for the Australian Dollar.

Additionally, tomorrow sees the release of the latest Chinese inflation data; evidence of accelerating price growth would suggest that demand for Australian exports will remain high, thereby boosting the Australian Dollar.