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The Australian dollar fell to a two-week low versus the US dollar on Wednesday, extending losses into its fourth straight session. The pair broke through an important level at US$0.6830 striking a low of US$0.6821.
The Australian dollar declined as investors continue to weigh up mixed US — China trade signals. Yesterday President Trump gave a speech at the Economics Club New York. The US President offered little new insight into progress between the two powers towards a phase one trade deal. He did say that a deal could be done soon. However, he also added that if there is no deal this time, the US could increase tariffs on Chinese imports.
The mixed message has weighed on demand for the Australian dollar. This is because China is Australia’s main trading partner. Owing to this trade relationship, a weaker Chinese economy amid further trade tariffs would negatively impacts the Australian economy and the Aussie dollar.
Australian wage data was also weighing on the Aussie dollar. Data from the Australian Bureau of Statistics showed that pay pressure remained subdued. Wages grew at unchanged at 2.2%, below the 3% level that the RBA estimates that is required in order for inflation to reach the 2-3% target.
Dollar Eases As Core Inflation Slows
The US dollar was broadly in demand in early trade on Wednesday as investors sought the greenback’s safe haven properties amid ongoing trade deal uncertainty. However, as the session progressed the dollar pared some gains following weak US inflation figures.
The US inflation report was a mixed bag. Headline inflation ticked higher in October to 1.8%, up from 1.7%, besting analysts’ forecasts. However, core inflation which excludes more volatile items ticked lower to 2.3% missing analysts’ expectations of 2.4%. The dollar softened slightly following the release.
Investors will now look ahead to Federal Reserve Chair Jerome Powell as he appears before Congress to discuss the state of the US economy. Jerome Powell is due to give his perspective on the economy two weeks after the Federal Reserve cur interest rates for a third time this year.
| 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. |
