The Australian dollar U dollar exchange rate rallied by 0.5% to a high of US$0.69 in early trade on Tuesday. The pair has just eased back slightly and is holding steady at US$0.69 at the time of writing.
The Reserve Bank of Australia (RBA) boosted the Aussie dollar this morning by keeping monetary unchanged. Interest rates will remain at the historically low 0.75% after three cuts this year, thanks to a slight improvement in Australian unemployment figures and a tick higher in inflation. Investors cheered the fact that the RBA are adopting a wait and see approach. Market participants’ expectations of another interest rate cut before the ed of the year has fallen significantly and this, offering support to the Australian dollar.
US — China trade deal optimism also boosted the Australian dollar on Tuesday. A report in the Financial Times said that US officials are debating whether to remove some tariffs on Chinese goods, as a concession to seal a partial deal, possibly even as early as this month.
Given that China is Australia’s largest trading partner any trade deal between the US and China will be good news for the Chinese economy and also the Australian economy. For this reason, the Australian dollar rallies on trade deal optimism.
US Non-Manufacturing Data Under Spotlight
The US dollar was in favour on Tuesday, just less so than the Australian dollar. The US dollar was bounding higher versus a basket of currencies, also on the back of US — China trade deal optimism. The ongoing trade dispute has negatively impacted the US manufacturing sector. Activity in the sector has weakened and factory orders have slumped to the lowest in four months. A trade deal between the US and China could ease the current slump in the US manufacturing sector. This would be beneficial for the US economy and the therefore the dollar.
Today investors will look towards US ISM non-manufacturing numbers. Analysts are predicting that the US service sector expanded in October to a health 53.4, up from 52.6 in September. A strong reading could calm any fears that the slowdown in the manufacturing sector is spilling over into the dominant service sector.
|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.