Pound Initially Drops

The Australian dollar is seen extending losses versus the US dollar for a second straight session on Tuesday. The Aussie dollar US dollar closed 0.2% lower in the previous session and is down a further 0.2% today. The pair is just holding above US$0.68.

The riskier Aussie dollar is on the back foot as investors trade cautiously ahead of a busy second half to the week and as investors await news as to whether the US will go ahead with the planned tariff hike on Chinese imports, as from the December 15th.

Trade continues to dominate market sentiment. Following weeks of mixed messages from both China and the US investors are no clearer as to whether a phase one trade deal is close to being agreed. Should the Trump administration go ahead and increase the tariffs on 15th December risk sentiment will take a hit. China proxy, the Australian dollar could come under increased pressure.

Australian economic data also dragged on the Aussie dollar on Tuesday. Business confidence dipped in November, according to the National Australia Bank’s index of business conditions. The index of confidence fell 2 points. The decline is consistent with ongoing weakness in GDP growth and suggests that here has been little or no improvement in economic growth in the final quarter.

Investors will now look ahead to consumer confidence data due for release later this evening.

Dollar Directionless Ahead of FOMC

The US dollar lacked direction across the European session on Tuesday. In the absence of high impacting or relevant US data dollar investors are choosing to sit on the side-lines and look ahead to tomorrow’s Federal Reserve monetary policy meeting.

Following three rate cuts across the year, policy makers believe that they have done enough to stabilise the US economy. Given the resilience of the labour market, the data suggests they might be right. Therefore, market participants are expecting the Fed to keep interest rates on hold when they make their announcement on Wednesday. Instead investors will look towards the press conference and the dot plot chart for more of a clue as to where monetary policy could go from here.


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.

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