The Australian Dollar US Dollar exchange rate has surged this week despite the Federal Reserve maintaining a cautiously optimistic tone, as Australian recession fears vanished due to a remarkably healthy trade surplus record. AUD USD has gained from 0.75 to 0.76 this week.
Australian Dollar (AUD) Demand Remains Solid on Australia’s Record Trade Surplus
The Australian Dollar has made significant gains this week, easily taking advantage of US Dollar.
This has been largely due to the Australian trade surplus report for December, which was expected to improve from A$1.24b to A$2.2b but instead soared from a revised A$2.04b to A$3.51b – a record high.
The figure implied that Australia had seen stronger than expected economic growth in Q4 2016 and this surge in exports also indicated that prices of key Australian commodities such as iron ore and coal would continue to see strong performance.
Concerns that Australia could fall into a technical recession or have its ratings downgrade lowered from AAA also faded thanks to the report, helping to make this week a bumper one for AUD traders.
US Dollar (USD) Jittery on Fed Disappointment and Trump Concerns
Demand for the US Dollar has been mixed this week. As the second week of the Trump administration comes to a close, investors are becoming increasingly uncertain about the future of the US economy and geopolitical position.
Key points this week include critical comments on the low strength of the Euro from a top Trump adviser, Peter Navarro, which worsened concerns that the Trump administration was going to focus on currency value during trade talks.
This week’s Federal Reserve meeting was also disappointing to US Dollar traders, as the Fed gave no additional information on its US interest rate outlook besides the same tone it took in December – the possibility of three rate hikes throughout the year if uncertainty fades.
Australian Dollar US Dollar Exchange Rate Forecast: Reserve Bank of Australia Meets Next Week
The Reserve Bank of Australia (RBA) will meet for its first policy decision of 2017 next week and investors are expecting a more optimistic tone from the bank due to the past week’s impressive Australian trade surplus results.
While no action from the RBA is expected, any indication that the bank will stay away from returning to easing monetary policy this year – or even the possibility that interest rates could be hiked in the foreseeable future – would allow the ‘Aussie’ to continue its recent strong streak.
The Australian Dollar has largely been able to shake off concerns about future US-Australia relations, even despite reports of a turbulent call last week between US President Trump and Australian Prime Minister Turnbull.
Over in the US, next week’s economic calendar won’t be as busy as last week’s. US trade deficit figures will be published on Tuesday followed by Michigan consumer sentiment figures later in the week. This will leave the ‘Greenback’ mostly reacting to the latest Trump developments.
AUD USD Interbank Rate
At the time of writing, the Australian Dollar US Dollar exchange rate trended in the region of 0.76, while the US Dollar Australian Dollar exchange rate traded at around 1.30.