The Australian dollar is extending gains versus the US dollar in early trade on Tuesday. The Aussie dollar US dollar exchange rate closed the previous session 0.7%, higher at US$0.6818. Today the pair has advanced a further 0.3% at the time of writing, hitting a high of US$0.6862.
The Australian dollar was on the front foot after the Reserve Bank of Australia kept interest rates unchanged, at a record low of 0.75%, at its final monetary policy decision in 2019. Market participants were widely expecting the RBA to stay pat after cutting rates in June and July this year, however the possibility of a further 0.5% rate cut next year was discussed.
The RBA policy makers retained their view that the Australian economy could be slowly turning a corner, with macro data suggesting that things could be starting to look up. The central bank expects the Australian GDP to gradually lift to 3% by 2021 and inflation to be close to 2% by 2020 – 2021. The RBA also expect unemployment to fall to 5%. The cautious optimism from RBA Governor Dr Phillip Lowe helped lift the Australian dollar, even though there is still widespread speculation that the RBA will cut again next year.
The Australian dollar also managed to shrug off disappointing trade news. President Trump signalled that he was prepared to wait another year to get the right trade deal with China. This cast doubts over whether a phase one trade deal would be signed within weeks, as investors had been assuming.
The comments by Trump come after Chinese manufacturing data released earlier in the week showed that the manufacturing sector in China performed better than expected amid the ongoing US – China trade dispute. This has calmed Australia dollar investors nerves, given that the Australian economy is so dependent on the health of the Chinese economy, its principal trading partner.
Dollar Consolidates Losses
The dollar is consolidating after yesterday’s steep losses. Trade tensions are keeping the dollar depressed in a data quiet session. Investors will continue watching trade headlines and will also look toward a slew of data tomorrow. The ADP private payrolls and ISN non-manufacturing reports will be closely watched.
|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.