After rallying over 3% versus the US dollar in December, the Australian dollar is edging lower in the European session at the start of trading in 2020. The Australian dollar US dollar exchange rate has dipped below support at $0.7000.
The Aussie dollar rallied hard at the end of the previous year, supported by developments the US — China trade situation. The rally was looking tired at the start of the new year. The Aussie dollar failed to capitalise on improved market sentiment after the People’s Bank of China (PBOC) decision to cut the reserve ratio requirement by 50 basis points. Instead the Chinese proxy focused on the weaker than forecast Chinese manufacturing PMI.
The data showed that the manufacturing sector expanded at a softer pace than analysts have been expecting in December. The Caixin PMI declined to 51.5 down from 51.8. Delving deeper into the numbers new orders growth softened and employment stagnated. Weakness in China’s economy, Australia’s principal trading partner is a concern for Aussie dollar investors.
Looking ahead Australian dollar investors will pay attention to Australian ANZ job advertisement data for fresh clues over the health of the Australian economy.
Dollar Gains Ahead Of Manufacturing Data & Fed Minutes
The US dollar is bounding higher in early trade on Thursday, snapping a day losing streak versus the Australian dollar. The dollar has been out of favour over the past few weeks as US — China tensions have eased. The phase one trade deal, which is due to be signed in the coming weeks has lifted the global economic outlook, hitting demand for the safe haven greenback.
Today investors are digesting better than forecast jobless claims data. Attention will now switch towards US manufacturing PMI numbers and the minutes from the latest Federal Reserve monetary policy meeting.
Analysts are expecting the US manufacturing sector to remain in expansion territory at 52.5 in December as it continues to show signs of recovery from the slump towards the end of 2019. The Fed kept policy unchanged at the meeting in December. Investors will be scrutinizing the minutes for further clues as to where the Fed sees the path of interest rates going.
| 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. |
