The Australian dollar jumped 1.3% versus the US dollar across the previous week. The pair struck a three and a half month high of US$0.9630, before ending the week at US$0.9914. The Aussie dollar US dollar exchange rate is edging lower in early trade on Monday.
Weak Australian retail sales weighed on demand for the Australian dollar at the start of the week. Retail sales increased just 0.2% month on month in September. This was worse than the 0.5% increase that analysts had been expecting. The data showed tax cuts and successive interest rate cuts have failed to, so far, stimulate spending in Australia.
The weak retail sales in unlikely to drag the Australian dollar much lower, because the Reserve Bank of Australia are not expected to take any action following the release. This is because data last week showed that 26,200 full time jobs were added last month and the jobless rate fell to 5.2%, the first drop since February. The jobs report is closely watched by the RBA and given that it is showing encouraging signs the central bank is unlikely to ease policy further for the time being.
The Australian dollar was turning a blind eye US — China trade headlines. The two sides signal progress towards an initial Trump — Xi deal. US Commerce Secretary Wilbur Ross has indicated that the US and China could conclude an initial agreement this month, before working on additional phases. Given the close link between the Australian economy and the Chinese economy, usually good news on trade helps boost the Australian dollar.
US Factory Orders Up Next
The US dollar was strongly out of favour across the board in the previous week. The Federal Reserve cut interest rates, as market participants had expected. However, the central bank also indicated that the bar was much higher for a rate hike than a rate cut.
US jobs data was also a mixed bag. The headline job creation figure smashed expectations. However, average hourly earnings growth was lukewarm at best. US ISM manufacturing data last week also gave investors cause for concern.
Today US factory orders will be under the spotlight. Analysts are expecting factory orders to have declined -0.5% month on month in September; a figure that would confirm that the US manufacturing slump is far from over.
|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.