After rallying 1% versus the US dollar in the previous week, the Australian dollar was heading southwards as the new trading week begins. The Australian dollar US dollar exchange rate is trading 0.2% lower at the time of writing at US$0.6825.
Trade headlines and weak Chinese data were dragging on demand for the Aussie dollar on Monday. Chinese exports shrank for the fourth straight month in November, highlighting the pressure on manufacturers amid the ongoing US — Sino trade dispute. The weak data brought back concerns of a slowdown in China, the world’s second largest economy. The Australian dollar is a proxy for China explaining the drop in the Aussie.
There was one brighter area within the trade report; the data from China also showed growth in imports, which could be a possible indication that stimulus steps being taken by Beijing, are in fact starting to work through the financial system and lift domestic demand.
The Chinese data came to a backdrop of increasing tensions between the US and China after President Trump called on the World Bank to stop lending to China. His comments don’t bode well for a deal between the two sides ahead of the December 15th deadline. Should the Trump administration deem that insufficient progress has been made towards a trade deal by the 15th December, a fresh round of trade tariffs will be applied. Under these circumstances, the Australian dollar could drop lower.
Investors will now look ahead to Australian consumer confidence data due later today and a speech by Reserve Bank of Australia’s President Phillip Lowe, who is due to give a speech.
Dollar Slips As NFP Boost Fades
The US dollar is trending broadly lower, albeit higher than the Australian dollar, after surging on Friday following a stellar jobs report. 266,000 jobs were created in November, well ahead of the 180,000 forecasts. The figures showed that US labour market is solid and have cemented investors’ belief that the Fed will keep monetary policy on hold at the Fed meeting this week.
Today optimism following the non-farm payroll report is starting to fade and trade tensions are also hitting the mood for the greenback. There is no high impacting data due to be released today or tomorrow. Investors will remain glued to trade headlines.
|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.