Australian Dollar to US Dollar Exchange Rate Continues to Climb on US Wage Data
Despite a lack of changes in Australian Dollar to US Dollar (AUD/USD) exchange rate trade on Monday, the pair continued to climb gradually on the back of last week’s data and a brief boost to market risk-sentiment.
Trade jitters caused volatility in AUD/USD last week, as the pair opened the week at the level of 0.7404 before dipping to a yearly low of 0.7313.
AUD/USD has rebounded since last Tuesday though, finishing last week at the level of 0.7430 and climbing to trend near a half-month-high of 0.7481 on Monday.
The primary reason for the Australian Dollar to US Dollar exchange rate’s gains is lasting reaction to last Friday’s disappointing US wage growth results.
While much of the US Non-Farm Payroll data impressed, wages were unexpectedly slow. This dampened Federal Reserve interest rate hike bets and made risky currencies like the Australian Dollar (AUD) more appealing.
Australian Dollar (AUD) Exchange Rates Benefit from Fresh Risk Rally
Demand for the risky Australian Dollar has been surprisingly sturdy in recent sessions, despite broad concerns about the US-China trade war and how it may impact nations that heavily rely on trade like Australia.
Weakness in the US Dollar (USD), as well as stronger performance in Chinese markets since the end of last week, has bolstered market demand for the Australian Dollar.
The Australian Dollar is a risky currency that often benefits from signs of stronger global trade.
As China is Australia’s biggest trade partner, optimistic trade news from China makes the ‘Aussie’ especially appealing.
Still, the reality of the US-China trade war has ultimately kept a lid on Australian Dollar strength.
Uncertainty remains high and much of the Australian Dollar’s recent strength has more to do with US Dollar weakness and a rebound from the currency’s worst levels.
US Dollar (USD) Exchange Rates Tumble as Federal Reserve Bets Fall
There hasn’t been much in the way of surprising US news over the weekend, and when markets opened on Monday investors were still focused on last week’s disappointing US wage results.
Most of June’s US Non-Farm Payrolls report beat forecasts, showing that the US was still creating many new jobs.
However, the latest wage data surprised investors by indicating that US wage prices were not climbing at the expected pace.
US average hourly earnings came in at 0.2% month-on-month in June, below the expected 0.3%. The yearly figure was expected to climb to 2.8%, but unexpectedly remained at 2.7%.
The data caused concerns that the Federal Reserve may not hike US interest rates four times in 2018 after all, as bets for a fourth rate hike slipped. This has been weighing on USD performance.
Australian Dollar to US Dollar (AUD/USD) Forecast: US Inflation in Focus
Last week’s US wage price results were disappointing, leaving investors highly anxious to see how other US price pressures have performed over the last month.
Thursday will see the publication of the US Consumer Price Index (CPI) from June, which is likely to be the week’s most influential figure for AUD/USD trade.
US inflation is forecast to have improved slightly year-on-year, from 2.8% to 2.9%. The core figure is forecast to have edged higher from 2.2% to 2.3%.
If US inflation fails to improve as expected, investor concerns about US price pressures will worsen and Federal Reserve interest rate hike bets will fall, putting additional pressure on the US Dollar.
This would be the best opportunity for AUD/USD to continue this week’s recovery rally, though gains will remain limited due to trade jitters.
Australian confidence data due on Tuesday and Wednesday could also influence the Australian Dollar to US Dollar (AUD/USD) exchange rate.