Pound Drops vs. Euro on Brexit Fears & Weak Manufacturing Data

The Australian dollar has jumped as trading for the new week kicks off. The Australian dollar US dollar exchange rate has rallied 0.4% to a high of US$0.67893 at the time of writing.

The Aussie dollar is being supported by upbeat Chinese trade data. Chinese Caixin / Markit manufacturing purchasing managers index hit 51.8 in November after ticking up from 51.7 in October. The sector grew at its fastest pace since December 2016. The data calmed investor nerves over the negative impact that the ongoing US – China trade dispute was having on the world’s second largest economy.

The support that the Australia dollar is receiving in the European session could face some headwinds later in the Asian session as the Reserve Bank of Australian will conclude its final monetary policy meeting for the year.

Market participants are broadly expecting the RBA to leave interest rates on hold this month after having cuts rates in quick succession earlier in the year. With no rate cut expected the focus will be on the RBA’ assessment of the economic conditions in Australia and its forward guidance for the coming year.

Should the central bank adopt a dovish stance and hint towards more easing across 2020, the Australian dollar could come under selling pressure. Analysts are currency expecting another rate cut in February, with the potential for another round of easing later in the year.

US Manufacturing PMI Up Next

The US dollar was trading just marginally lower in early trade on Monday. The dollar was under pressure as investors focused on US – China trade relations ahead of the US Manufacturing pmi data later today.

The latest reports indicate that progression towards a phase one trade deal had stalled following President Trump’s move to sign the Hong Kong bill into law, backing the anti-government protests.

US dollar investors will now look ahead to ISM Manufacturing data. Analysts are expecting the index to rise to 49.4 in November, up from 48.3 in October and 47.8 in September. Investors will be watching to see if the rebound in the manufacturing sector continues despite the US – China trade dispute continuing. A strong reading will support the Fed’s case that no monetary policy easing is necessary for now.

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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