The Australian dollar extended gains versus the dollar for a second straight session on Tuesday, closing 0.4% higher at 0.6849. After a shaky start on Wednesday, which saw the Australian dollar touch a low of US$0.6813, the Aussie dollar has rebounded and is heading back towards the flat line at the time of writing.
Persistent trade uncertainty plus weak domestic data sent the Aussie dollar lower in early trade on Wednesday. According to the Australia Bureau of Statistic, Australia’s GDP growth slowed to 0.4% in the three weeks to September. This was weaker than the 0.6% that analysts had expected, showing that consumers failed to use falling interest rates and $25 billion worth of tax cuts to increase spending.
Household spending softened through the quarter whilst exports and government spending offered support to the economy. The weaker than forecast figures encourage investors to assume that the Reserve Bank of Australia could look to cut interest rates further in order to shore up the economy. As a result, the Aussie dollar slipped.
The data came to a backdrop of trade uncertainty. President Trump said that he was prepared to wait until after the US elections in 2020 to agree a trade deal with China, sending the Australian dollar, a proxy for China, lower. The latest trade headlines are more encouraging. Reports on Bloomberg suggest that the US and China are closer to rolling back tariffs and agreeing to a phase one trade deal. The latest headlines are boosting the Aussie dollar.
Dollar Dives On Weak ADP Figures; ISM Non-Manufacturing Up Next
The US dollar traded broadly lower again on Tuesday on trade war headlines and weak domestic data. The ADP private payroll report showed that the private sector added fewer jobs than expected in November. Just 67,000 jobs were created, well short of the 140,000 that analysts had been expecting. Given the close correlation between the ADP report and Friday’s keenly awaited non-farm payroll report today’s numbers have unnerved investors.
Attention will now shift to the ISM non-manufacturing report. Analysts are expecting activity in the dominant sector to remain steady in November at 51.6. Should this report show that the weakness in the manufacturing sector is spilling over into the service sector, the dollar could decline.
|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.