Uncertainty about Fed Interest Rate Decision Pushes AUD/USD Exchange Rate Down
The Australian Dollar (AUD) has fallen against the US Dollar (USD) today, primarily because of uncertainty about upcoming US activity.
The main worry for AUD traders is that the US central bank, the Federal Reserve, will raise interest rates.
Such an action could trigger a sharp Australian Dollar devaluation, because a strong US Dollar reduces risk sentiment among currency traders.
Because its value is partly tied to commodity prices, the Australian Dollar is considered more risky than the US Dollar.
US Dollar to Australian Dollar Exchange Rate Rises despite G7 Concerns
Because of low demand for other global currencies, the US Dollar (USD) has appreciated against the Australian Dollar (AUD) today despite international concerns.
President Donald Trump is attending the two-day G7 summit in Canada ahead of his meeting with North Korean leader Kim Jong-un in Singapore next week.
Although Mr Trump may not attend the G7 summit for long, there are fears that he could further isolate the US from a trading perspective.
Before departing for the meeting, Mr Trump has criticised Canada, the EU and other nations for supposedly hitting the US with unfavourable trade.
There are genuine concerns that the US might end up leaving the G7 group due to differences, which have put a ceiling on recent US dollar gains.
Weekly Australian Dollar to US Dollar Exchange Rate Forecast: Are AUD/USD Gains ahead on Lower Unemployment?
Next week, the Australian Dollar to US Dollar (AUD/USD) exchange rate could first be affected by Australian business confidence stats on Tuesday.
Following these will be consumer confidence figures on Wednesday, finishing with jobs market data on Thursday.
There could be mixed AUD/USD movement before Thursday, as business confidence is predicted to fall slightly but higher consumer confidence is forecast.
The week might end on a positive note overall, as the Australian unemployment rate in May is predicted to have fallen from 5.6% to 5.5%.
Such a result could cause an Australian Dollar rally, as a lower unemployment rate might lead to faster wage growth because of a smaller labour pool.
Rising wage growth is a key factor behind the Reserve Bank of Australia’s (RBA) decision to raise interest rates, so through association lower unemployment might boost the AUD.
Weekly US Dollar to Australian Dollar Forecast: Will USD/AUD Advance on Fed Rate Hike?
On the other side of the pairing, the US Dollar (USD) has the potential to advance against the Australian Dollar (AUD) next week on inflation data and a Federal Reserve meeting.
Tuesday’s inflation rate figures are predicted to show faster price growth reported across the month and the year in May, which will raise hopes for a Fed rate hike.
Wednesday will bring an actual Federal Reserve interest rate decision, which is expected to result in a rate hike from 1.75% to 2%.
This outcome has largely been factored in by markets, but such a decision could still lead to clear USD/AUD exchange rate gains due to a rallying US Dollar.
In the event that these forecasts are premature and Fed officials instead leave interest rates at 1.75%, the US Dollar could tumble against the Australian Dollar due to disappointment.