The Australian dollar rallied 0.5% higher versus the US dollar across the previous week. The pair is extending those gains in the European session at the start of the new week. The Aussie has advanced 0.25% against the greenback and is targeting US$0.69.
The Australian dollar is on the front foot following a twin boost for the China proxy, amid a phase one trade deal between the US and China and upbeat Chinese industrial production data. Chinese industrial out and Chinese retail sales were both much stronger than analysts had been expecting. Production jumped 6.2% year on year in November, whilst retail sales soared 8% compared to a year earlier.
The data comes following the agreement of a first phase trade deal agreed at the end of last week. The trade deal, whilst limited, could go someway to dispelling some of the uncertainty that has dragged over the Chinese, and global economy. With the December 15th trade tariff hike now averted the uptick in the Chinese economy is more likely to last longer.
The details of the trade agreement still haven’t been published. Investors will scrutinize any further trade deal details closely in an attempt to gauge how good a deal it is.
Australian dollar investors will continue monitoring trade headlines whilst also looking ahead to Australian consumer confidence data due on Tuesday.
US Manufacturing & Service Sector PMI’s In Focus
The US dollar trended lower at the start of the new week as investors continued to sell out of the safe haven greenback in favour of riskier currencies following the US — China trade deal.
The Federal Reserve also weighed on the value of the dollar in the previous week following the Federal Reserve rate announcement. The US central bank kept interest rates on hold, as was expected. However, Federal Chair Jeremy Powell said that the Fed would need to see a significant and persistent uplift in inflation to consider hiking interest rates. Investors interpreted this as a dovish stance by the Fed, sending the dollar lower.
Investors will now turn their attention to US manufacturing and service sector PMI’s for further clues over the health of the US economy.
|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.