The Australian Dollar to US Dollar (AUD/USD) exchange rate has risen marginally, having been pushed up by hopes for Australian interest rate hikes in 2018.
Predictions for RBA Rate Hike Trigger Australian Dollar to US Dollar Advance
The recent AUD/USD rate rise has been partially caused by recent estimates for Reserve Bank of Australia (RBA) activity in 2018.
The RBA last hiked the interest rate (also known as the official cash rate) in 2010, so a rate hike has been long overdue for some AUD traders.
Economists at HSBC have been optimistic on this front, forecasting that the RBA could finally break the ice and raise the cash rate later this year.
Discussing the conditions and likelihood for a future RBA interest rate hike, HSBC economists Paul Bloxham and Daniel Smith said;
‘The main force at work has been that mining investment is stabilising, after having fallen significantly in recent years.
At the same time, growth in the non-mining sectors has remained solid.
As conditions in the mining industry improve and the local labour market tightens up, we expect a modest pick-up in wages growth.
[This] should, in turn, see the RBA begin to normalise its current very stimulatory cash rate setting in 2018.
Our central case is for the RBA to begin to lift its cash rate from mid-2018’.
Any suggestions that Australian interest rates could pick up this year are considered good news, as such action could indicate RBA confidence in national economic stability.
USD/AUD Exchange Rate Tight as US-NK Nuclear Argument Continues
The US Dollar to Australian Dollar (USD/AUD) exchange rate has dropped today, following a flurry of social media posts from US President Donald Trump.
Getting the New Year off to a bombastic start, Trump has once again inflamed tensions with North Korea by debating the size of his ‘nuclear button’.
Amid a string of tweets about Iran and Palestine, Trump also made room for North Korea, stating;
‘North Korean Leader Kim Jong Un just stated that the “Nuclear Button is on his desk at all times.”
I too have a Nuclear Button, but it is a much bigger & more powerful one than his, and my Button works!’.
This keeps the prospect of a violent escalation on the table, which has done little to reassure anxious traders.
Hawkish Fed Minutes could Trigger AUD/USD Exchange Rate Decline
The Australian Dollar may lose its tentative gains on the US Dollar in the near-term, when the Federal Reserve minutes for its December meeting are released.
The US central bank’s minutes could outline its overall rate hike plans for 2018, which may mention four planned rate hikes instead of three as some expected.
If the bank does seem to be planning for more interest rate hikes in 2018, the US Dollar could rise sharply.