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AUD/USD Exchange Rate Fluctuates on Risk-Sentiment

US Dollar Exchange Rates

The Australian Dollar to US Dollar exchange rate is currently up, but has been fluctuating throughout the week with news from both Australia and the US dictating risk appetite.

Australian Dollar (AUD) Firms on Bullish Employment News

The ‘Aussie’ has found itself buoyed by multiple factors this week despite an increasingly strong US Dollar. Already well up from the week’s opening levels of 0.7552, the AUD/USD pair climbed an additional 0.6% during Thursday’s session and at the time of writing was trending in the region of 0.7710.

Wednesday’s strong Chinese export data boosted sentiment towards China’s trade partners (like Australia) and the Australian Dollar also benefitted from a surge in oil and iron ore prices.

A sudden reversal in oil prices early on Wednesday morning, due to massive US crude oil inventories, was also slightly offset by hopes that an oil production ‘freeze’ would be agreed on this week, something that would inject more long-term stability into the commodity trade.

Australia’s domestic dataset releases on Thursday were also predominately ‘Aussie’ positive. These included consumer inflation expectation figures for April, which scored at 3.6% over 3.4%, as well as vital employment data – which proved to be unexpectedly upbeat.

Despite being predicted to worsen from 5.8% to 5.9%, the Australian unemployment rate actually lightened to an impressive 5.7%.

While this may have been affected by a lower-than-expected participation rate, the significant employment change of 26.1k indicates that a considerable amount of citizens entered work.

US Dollar (USD) Holds Ground on Inflation Reports

Bullish Australian news was near-matched by improving favour towards the US Dollar towards the end of the week.

Starting the week off reeling from risk-on markets and a dovish Federal Reserve, the US Dollar strengthened considerably during Wednesday’s session as investors readjusted their positions to prepare for Thursday’s Consumer Price Index (CPI) data.

This US Dollar strengthened in spite of largely negative data from Wednesday’s New York Session, with retail sales scoring poorly across all prints and the key release showing a contraction of -0.3% despite forecasts of 0.1%. Reuters UK writes;

“An unexpected fall in US retail sales in March supported Yellen’s cautious approach. The disappointing data contributed to a fall in US yields, yet it failed to dent the rallying Dollar.”

‘Greenback’ strength may also have been bolstered as the risk-on market tapered out in response to the aforementioned US oil reserves data. April 8th’s crude oil inventories were reportedly at a whopping 6634k, a huge increase from the previous figure of -4937k and well above forecasts.

With crude oil ample in the US, oil prices plummeted and commodity currency appetite softened.

Unfortunately, the recently released CPI data appears to have left the US Dollar uninspired as it failed to reflect forecasts of rising from 1.0% to 1.1% in its yearly print. While investors had already been increasing their Fed rate hike bets as they anticipated the release, the final figure was a disappointing 0.9%.

Australian Dollar to US Dollar Exchange Rate Forecast: AUD/USD Could Reel on US CPI

Investors had their eyes set on the key indication of United States inflation during Thursday’s session, which (after printing poorly) is unlikely to see the US Dollar pushing back against the Australian Dollar’s rally.

While investor reaction to the result could be considerably negative, any movement may be softened by other data released around the same time, such as continuing jobless claims falling by more than forecast.

Australian data is expected to be quiet, on the other hand, with only a Reserve Bank of Australia (RBA) stability review due for release on Friday morning.

At the time of writing, the Australian Dollar to US Dollar (AUD/USD) exchange rate was trending in the region of 0.7700, while the US Dollar to Australian Dollar (USD/AUD) exchange rate trended around 1.2979.