The Australian dollar closed flat versus the US dollar on Monday and the pair continues to hover close to the flat line across the European session on Tuesday. At the time of writing AUD/USD was trading a breath below US$0.69.
There has been little love for the Australian dollar despite China’s December trade data beating estimates by a substantial margin. Chinese dollar dominated exports rose 7.6% year on year in December, against a -1.3% drop in November. December imports were 16.3% higher than a year ago. Analysts had expected exports to increase 3.2% and imports to rise 9.6%.
The data indicates that there is light at the end of the tunnel after the drawn-out trade war with US. The phase one trade deal agreed last month appears have boosted confidence and improved trade into and out of China. Normally strong data from China would lift the Australian dollar, often referred to as China’s proxy.
There is no high impacting Australian economic data due until Thursday. In the meantime, the Aussie could be driven by sentiment surrounding the signing of the US – China trade deal, due to take place tomorrow.
US Inflation Misses Forecast
The US dollar traded mixed versus its peers in the previous session. In an absence of economic data investors looked eagerly towards the signing of the phase one trade deal. Improved sentiment across the financial markets weighed slightly on the safe haven US dollar.
Today investors’ gaze was back on the US economic calendar with the release of US inflation data. Dollar investors have so far shrugged off the slightly disappointing read. Data showed that inflation increased 0.2% month on month in December, down from 0.3% the previous month. Annually inflation increased 2.3%, up from 2% in November but short of analyst’s expectations. Core inflation remained steady at 2.3%.
Consumer prices are above the Fed’s 2% target. However, the fact that consumer pries rose more slowly on a monthly basis indicates that inflation moderated heading into 2020. This data won’t encourage the Fed to tighten monetary policy. The Fed have said that they need to see a significant and persistent rise in inflation to hike rates and this data doesn’t fulfil those requirements. The dollar could come under pressure following the reading.
|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.