Royal Commission on AU Banks Damages AUD/USD Exchange Rate
The continuing fallout from an extensive investigation into Australian banks has caused a major Australian Dollar to US Dollar (AUD/USD) exchange rate decline today.
Initiated to look into the conduct of Australia’s ‘Big Four’ banking institutions, the Royal Commission has exposed alarming deficiencies across the board.
Alongside fees being charged when none were advertised, the banks have variously been found guilty of misleading clients and charging deceased customers.
The investigation has shaken confidence in Australia’s biggest banks and with little other news to refer to, Australian Dollar traders have abandoned the AUD.
Underlying Trade War Concerns Keep Australian Dollar to US Dollar (AUD/USD) Exchange Rate Down
Another factor weighing on the Australian Dollar recently has been the fear that the Australian economy could be harmed by a US-China trade war.
Although the economic conflict has not been in the headlines recently, there are still fears that China might turn on Australia based on recent official remarks.
As the Australia government attempts to crack down on foreign involvement with political parties, China’s Ambassador to the country, Cheng Jingye, has said;
‘If there is a growing lack of mutual trust, in the long run, it may have some undesirable impact (on trade relations with China).
‘We have seen a kind of systematic, irresponsible, negative remarks and comments regarding China which has caused an adverse impact on bilateral relations.
‘It is detrimental to the image of Australia in the eyes of the Chinese public. It is something that neither side would like to see’.
US Dollar to Australian Dollar Exchange Rate (USD/AUD) Rallies as PMI Readings Beat Forecasts
Higher-than-expected economic activity in the US during April has boosted the US Dollar (USD) today, causing a 0.6% advance against the Australian Dollar (AUD).
The preliminary PMI readings have shown rising activity for the composite, manufacturing and services readings, raising optimism among USD traders.
Other good news has been that the quantity of existing home sales in March has risen, by 1.1% instead of 0.2% as predicted.
Australian Dollar to US Dollar Exchange Rate Forecast: AUD/USD Recovery Possible on AU Inflation Data
The Australian Dollar (AUD) may be able to regain lost ground against the US Dollar (USD) in the near-future, when Q1 inflation rate data is released.
The readings, out on 24th April, are tipped to show a minor slowdown in quarter-on-quarter inflation but a year-on-year rise.
Higher annual inflation could raise hopes among AUD traders that Reserve Bank of Australia (RBA) officials might consider a near-term AU interest rate hike.
That said, the RBA has historically held off on raising rates because of concerns that slow wage growth and high household debt are making interest rate hikes untenable.
The next major data that could influence US Dollar exchange rates will be out on 24th April, consisting of reported new home sales and a confidence reading.
The CB consumer confidence measure for April is tipped to show a minor reduction in levels of optimism.
Such a result may devalue the US Dollar slightly, but there is an equal chance for a US Dollar to Australian Dollar exchange rate rise if the level of new homes sales rises.