Doubts over RBA Rate Hikes causes AUD/USD to Slide
The Australian Dollar US Dollar (AUD/USD) exchange rate continued to retreat on Wednesday as an uptick in wages failed to inspire confidence in the possibility of a rate hike from the RBA this year.
At the time of writing AUD/USD is down by around 0.3%, with the paring having shed almost a cent since the start of the week.
Australian Dollar’s (AUD) Slides Despite Pick Up in Wages
The Australian Dollar was forced to cede ground against the US Dollar again on Wednesday despite domestic wage figures coming in higher than expected.
According to data published by the Australian Bureau of Statistics (ABS), the domestic wage price index rose 0.6% in the fourth quarter, beating expectations that it would remain flat at 0.5%.
Analysts at ABS attributed the rise to a fall in unemployment, which has forced employees to start raising wages in order to attract staff.
However with the rise ultimately being only very marginal and mostly focused in the public sector, the result failed to excite investors.
In fact with many analysts forecasting that today’s data is unlikely to prompt any response from the Reserve Bank of Australia (RBA) in regards to hiking rates, markets took a dovish stance towards the ‘Aussie’.
Shane Oliver, Chief Economist at AMP Capital said;
‘We see no reason for the RBA to change its conclusion that the lift in inflation towards target will be gradual and we continue to expect that the RBA won’t be raising rates until late this year at the earliest.’
Meanwhile losses in AUD/USD were also fuelled by the continued rebound in the US Dollar this week, with strengthening US bong yields helping to renew confidence in the currency.
Greg McKenna, Chief Market Strategist at AxiTrader said;
‘The US dollar is getting it’s mojo back, My sense at the moment is US bond rate stability is good for the US dollar because it doesn’t spook traders… [about the] size of the US deficit.’
AUD/USD Forecast: FOMC Minutes to Fuel Fed Rate Speculation?
Looking ahead the AUD/USD exchange rate could continue to tumble on Thursday, following the release of the minutes from the Federal Reserve’s latest policy meeting.
Investors will be watching closely for any signs that policy makers may be supportive of further monetary tightening this year, with USD likely to surge if they hint that four rate hikes may be possible in 2018.
Meanwhile the Australian Dollar may struggle for the remainder of this week with a lull in domestic data and muted commodity markets providing little momentum for the currency.