A strong session on Friday saw trade deal optimism boost the Australian dollar against the US dollar. The Aussie US dollar exchange rate finished Friday’s session 0.5% higher at US$0.6820, in its first winning session in over 5 days. Today the pair is once again trending lower, paring Friday’s gains.
After a quite start to the week the Australian dollar dropped sharply lower on the latest trade deal news. Doubts over a deal between the US and China are increasing, weighing on risk sentiment.
Investors have been focused on the US — Sino trade talks for months. Optimism was high on Friday that the US and China were close to a deal after White House Adviser Larry Kudlow’s comments that the two sides were nearing the final stages of a phase one trade deal.
Today, however, sentiment has soured on reports that China is troubled by the refusal of the US to rollback trade tariffs. China had said that the two sides agreed to rolling back the tariffs, something that President Trump then denied.
The Aussie dollar is particularly affected by US — China trade headlines because China is Australia’s main trading partner. Weakness in the Chinese economy owning to the trade dispute is a negative for the Australian economy and the Aussie dollar.
Dollar Slips As Investors Weigh Up Fed’s Position
The US dollar was broadly lower versus its peers in early trade on Monday albeit higher versus the Australian dollar. In addition to trade headlines US dollar investors were disappointed by Jerome Powell’s appearance before Congress last week.
Federal Reserve Chair Jerome Powell gave an upbeat assessment of the US economy. Yet whilst the US economy is recovering, it is doing so at a slow pace. As a result, Jerome Powell sees no need to tighten monetary policy. US dollar investors were disappointed by the Fed’s neutral stance.
The US economic calendar is quiet at the start of the week. Investors will glance towards US retailers which are due to report earnings in the first half of the week. Earnings from big names such as Macy’s and Home Deport will also give a clue as to how the US consumer is holding up. Weak earnings numbers could unnerve dollar investors.
|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.