AUD/USD Exchange Rate Forecast to Struggle on Damp Market Sentiment
Despite the fact that Australian ecostats produced mostly positive results, the ‘Aussie’ (AUD) softened versus most of its major peers during Thursday’s European session, with the AUD/USD exchange rate falling considerably thanks to safe-haven demand.
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Australian Dollar (AUD) Exchange Rates Forecast to Struggle
Given that the UK’s EU referendum is causing significant uncertainty in the currency market, damp market sentiment is likely to weigh on demand for the Australian Dollar. Even yesterday’s positive labour market data wasn’t enough to offset ‘Aussie’ losses overnight.
May’s Australian Unemployment Rate held at 5.7%, whilst May’s Employment Change saw 17,900 newly employed; bettering the market consensus of 15,000.
In response to the labour market figures, Morgan Ben, economist at JP Morgan, said; ‘After a quite speedy drop-off in jobs growth early in 2016, May provided some welcome stability, and was consistent with annual employment growth stabilising around 2 per cent over the year.’
However, RBC strategist Michael Turner was unimpressed with the data results; ‘Added to recent data on wages and unit labour costs, the state of the labour market remains consistent with ongoing low inflationary pressures and further RBA easing.’
With a complete absence of domestic data to provoke changes during today’s session, the ‘Aussie’ is likely to continue trending lower versus its peers unless there is a significant shift in market sentiment.
US Dollar (USD) Exchange Rate Forecast to Advance
Despite the fact that the Federal Reserve delivered a dovish speech following the interest rate decision in which rates were kept unchanged, the US Dollar rallied versus a number of its peers overnight.
Chairwoman Janet Yellen reduced growth forecasts and reiterated the likelihood that tighter policy will be extremely gradual.
The US Dollar’s appreciation overnight was the result of heightened demand for safe-haven assets after commodities prices declined and global equity markets mostly fell.
Market sentiment has also dampened considerably as the UK’s ‘Brexit’ vote draws ever closer. Most analysts fear that if the UK leaves the EU the ramifications will be felt across the globe.
Following the Bank of England (BoE) interest rate decision, the meeting minutes highlighted policymaker concerns regarding the far-reaching ramifications of a Brexit. The bank stated that there were ‘risks of adverse spill-overs to the global economy’ from the June 23rd EU referendum vote.
Such is the demand for safe-haven assets that an unexpected drop in US annual Consumer Prices in May has minimal impact. However, there is potential for the US asset to cede ground as traders digest the drop to 1% annual inflation.
AUD/USD Exchange Rate Forecast to Hold Losses Despite Weak US Inflation
Given that market sentiment is showing little sign of a reversal, the Australian Dollar is likely to hold losses throughout today’s session. This is especially likely given the complete absence of domestic data to provoke changes.
There is potential for the US Dollar to cool even if safe-haven demand remains, however. This is because Yellen delivered a dovish speech following the Federal Reserve interest rate decision, and US inflation unexpectedly declined. Should this be the case, traders will likely flock to the Japanese Yen or the Swiss Franc.
The Australian Dollar to US Dollar (AUD/USD) exchange rate was trending within the range of 0.7334 to 0.7442 during Thursday’s European session.