Australian Dollar US Dollar Exchange Rate Falls on RBA Rate Cut Fears
The Australian Dollar US Dollar exchange rate has shown a massive slide earlier in the week as markets reacted to the increased chances that the Reserve Bank of Australia (RBA) will decide to cut rates at the next policy meeting.
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Recent minutes from the RBA show that the central bank is ready to enact stimulus if further ecostats print unfavourably. This, combined with the oversupply of iron ore has seen the ‘Aussie’ lose a fair amount of support within the markets.
Positively printing American ecostats saw the US Dollar garner support on Tuesday after data showed that June housing starts had heartily bested forecasts.
The Australian Dollar US Dollar exchange rate currently trades at 0.7488 after falling by nearly 0.30% over the course of the day.
Australian Dollar (AUD) Support Falls as Iron Ore Supply Fattens With Reduced Demand
The ‘Aussie’ had previously traded very favourably as strong commodities and global equities kept demand for the high-yielding Australian Dollar lifted.
That iron ore boost fell by the wayside after supply began to outstrip demand with Chinese ports stockpiling the commodity. With Chinese demand falling, Australian mining company Rio Tinto has continued to increase output leading to some form of supply glut that could see the commodity reach previously forecasted grim figures of $35 a tonne by the end of the year.
Weak wages and inflation data prints earlier in the week caused some investor panic as traders alit from the risk-correlated currency due to the Reserve Bank of Australia’s chances of a rate cut. Minutes from a recent RBA meeting show that the institution is willing to enact stimulus measures if ecostats continue to print poorly.
With risk appetite now muted, the hint at stimulus was enough to send traders running for more attractive assets.
US Dollar (USD) Remains Somewhat Strong on Impressive Housing Starts Report
The massive, forecast bursting increase in US Housing Starts kept demand for the ‘Buck’ relatively high over Tuesday’s session as falling Eurostocks and weak commodities kept risk appetite decidedly muted.
The recent string of favourable data prints have led traders to shift bets towards the US Federal Reserve hiking rates at some point in the near future. However, factors such as sustained declines in growth outlooks post-Brexit and the high value of the US Dollar keep the central bank from enacting monetary tightening too hastily.
Typically, a Fed rate hike sees US Dollar demand skyrocket as investors flock to take advantage of the favourable rates. As USD remains overvalued in a lot of analyst’s eyes, any further appreciation could begin to hamstring US exports markedly as importing nations find they have to foot a higher US goods bill.
However, the ‘Greenback’ is likely to enjoy further support since traders react in-kind to the possibility of a Fed rate hike.
AUD/USD Forecast to Move on Tomorrow’s US Job Data if Prints Disappoint
The only impactful ecostat to come out of Australia this week appears to be Thursday’s NAB Business Confidence survey for the second quarter. The ‘Aussie’ could likely experience declines if the report shows a massive decrease in business confidence.
The US holds some employment data set for release on Thursday along with the Philadelphia Fed report which details manufacturer’s confidence within the region. Also set for release are US housing market reports that detail housing prices and sales.
The jobs reports are forecast to be mixed while the Philly Fed index is expected to fall along with continuing jobless claims. However initial jobless claims are forecast to rise which could see the US Dollar fall on the perceived reduced likelihood of a near-term Fed rate hike.
If the majority of ecostats print unfavourably, it would likely place the Fed’s rate hike timetable further into the future, in turn seeing the Australian Dollar US Dollar exchange rate rally.