GBP/USD: Volatility Expected From Brexit

The Australian dollar struck a six-week low versus the US dollar in the Asian session. The Aussie dollar US dollar struck a nadir of US$0.6759 and has continued to hover close to that level across the European session.

The Australian dollar is on the back foot thanks to weak data and amid concerns over the US- China trade dispute. Private Capital Expenditure declined -0.2% in the third quarter, below the 0% that market participants were expecting. The data points to softer economic growth. The Reserve Bank of Australia have already cut interest rates three times this year to a record low of 0.75%. However, should economic growth continue to soften then the central bank could be forced to ease again next year. The prospect of loser monetary policy weighed on demand for the Australian dollar.

US – China trade news was also acting as a drag on the Aussie dollar. After the US stock market closed in the previous session, President Trump signed the Hong Kong bill into law. The move by Trump could put an immense strain on already fragile relations between the US and China. Beijing had pre-warned Trump not to interfere in their domestic issues. The act would enable the US to sanction pro-establishment individuals or businesses found guilty of human rights violations.

Dollar Quiet On Thanksgiving

The US dollar was trading flat on the day in a very quiet Thanksgiving session. The fallout in the financial markets following Trump’s signing of the Hong Kong bill has been limited. This is because the US stock markets are closed for Thanksgiving and whilst the US dollar is trading most Americans are not at their desks. For the real impact of the move investors will have to wait until Monday.

The dollar rallied in the previous session following a barrage of encouraging US economic data. Data showed that the US economy grew more quickly than initially expected in the third quarter. The US GDP was revised higher to 2.1% on an annualised basis. This was up from 1.9% in the first reading. US durable goods orders also impressed. The data reduced fears that the US economy was hitting tough times.  As investors pushed back on the prospect of any easing from the Fed, in the near term, the dollar advanced.

Tomorrow is a half day for the US. However, many take the full day as holiday meaning that trading volumes will be low again.

 

 

What do these figures mean?
When measuring the value of a pair of currencies, one set equals 1 unit and the other shows the current equivalent. As the market moves, the amount will vary from minute to minute.

For example, it could be written:

1 USD = 0.6784 AUD

Here, $1 is equivalent to approximately A$0.67. This specifically measures the US dollar’s worth against the Australian dollar. If the Aussie dollar amount increases in this pairing, it’s positive for the US dollar.

Or, if you were looking at it the other way around:

1 AUD = 1.4739 USD

In this example, A$1 is equivalent to approximately $1.47. This measures the Australian dollar’s worth versus the US Dollar. If the US dollar number gets larger, it’s good news for the Aussie dollar.

 


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