The Australian dollar closed 0.5% higher versus its US counterpart on Thursday. The Aussie dollar is extending those gains in the European session on Friday. The pair is up 0.2% at the time of writing as it tests resistance at 0.69. The pair is on course to have gained 0.3% across the week, the Aussies dollar’s third straight week of strengthening versus the greenback.
The Australian dollar advanced in the previous session on trade headlines and upbeat jobs data. The Reserve Bank of Australia will rest easier over the Christmas period after the latest official data showed a drop in unemployment. The unemployment rate slipped from 5.3% to 5.2% in November. Almost 40,000 jobs were added to the economy, more than making up for the loss of 24,800 jobs experienced in October.
The strong jobs data boosted the Australian dollar, as it gives the RBA some breathing space over cutting interest rates. However, analysts broadly believe that the Australian labour market is showing signs of fatigue, with the overall trend showing employment growth softening and unemployment levels drifting higher.
Also boosting the Australian dollar, which is also known as a China proxy, were US — China trade headlines. The US Treasury Secretary Steve Mnuchin said that he was confident that the phase one trade agreement would be signed in January. Whilst there have been few details on the deal, Steve Mnuchin’s comments helped boost optimism.
Dollar Looks To PCE Inflation Figures
The US dollar was broadly in favour on Friday, albeit less so than its Australian counterpart. US dollar investors cheered the release of US GDP, which confirmed growth of 2.1% in the third quarter. This was inline with the second revision. Personal consumption was a strong point, increasing 3.2%, above the 2.9% forecast.
Investors will now look towards US personal consumption expenditure, PCE inflation data. This is the Fed’s preferred measure of inflation. Analysts are expecting inflation to have ticked lower on an annual basis to 1.5% in November, down from 1.6% the previous month. On a monthly basis inflation growth of 0.1% is forecast.
The dollar has been well supported across this week owing to strong macro data. This has boosted investors’ expectations that the Fed will not continue its rate cutting cycle in 2020, lifting the greenback.
| 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. |