The Australian dollar US dollar exchange rate gained 0.5% in the previous session, closing at US$0.6897. Today, the pair struck a three and a half month high of US$0.6930 before paring those gains and slipping below US$0.6900, into the red.
Whilst the Australian dollar capitalised on dollar weakness in the Asian session, it has been unable to hold onto those gains. The Aussie dollar was able to shrug off disappointing Chinese manufacturing pmi data, however, concerns over the US — China trade dispute are weighing on demand.
Resurfacing difficulties between the US and China, as they try to reach and sign a trade deal are unnerving investors. China is reportedly unwilling to compromise on structural issues. China is doubting whether a long-term trade deal is possible at all with the US. These reports have poured cold water on hopes that the two sides were just weeks away from signing a deal at the APEC meeting in Chile.
The US — China trade dispute is important to Australia, because China is its largest trading partner. The health of the Chinese economy is very closely tied to the health of the Australian economy and therefore the value of the Aussie dollar.
US NFP Up Next
The dollar was under pressure after the Federal Reserve cut interest rates on Wednesday. The Fed, as expected, cut 0.25% off interest rates to 1.5%. The Fed signalled that it was done cutting rates for this cycle. However, Fed Chair Jerome Powell also said that there would need to be a very strong increase in inflation in order for the Fed to consider hiking interest rates.
Today inflation, as measured by PCE, the Fed’s preferred inflation gauge, stagnated in October compared to September. This was down from a 0.1% increase month on month in September. The weaker inflation hit demand for the dollar in light of Fed Powell’s comments on Wednesday.
US dollar investors will turn their attention to US non-farm payroll roll figures tomorrow. Analysts are expecting just 85,000 jobs were created in October. This would be down from 136,000 jobs created in September. A weak reading could unnerve dollar investors and drag the greenback lower.
|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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