The Australian dollar weakened versus the US dollar on Tuesday and is extending those losses across the European session on Wednesday. The Aussie dollar US dollar exchange rate is trading down 0.3% at US$0.6882 at the time of writing. This is the worst level that the pair has trade at in 5 days.
Reports that the US will not remove trade tariffs on Chinese imports until after the US Presidential elections in 2020 meant the Chinese proxy, the Australian dollar, struggled to gather any strength. Treasury Secretary Steven Mnuchin, however, did say that President Trump could consider lifting the tariffs under a phase two deal. His comments have failed to lift sentiment as investors remain dubious as to whether a phase two deal can be achieved.
The US and China are due to sign the first phase trade deal at 16:30 GMT today. Details of the deal still haven’t been made public but are expected to be released ahead of the signing. Investors are expected to scrutinize the deal carefully in an attempt to gauge how beneficial to the global outlook the deal really is.
Given the sparse nature of Australian economic data over the coming days, the Aussie will be particularly susceptible to any changes in market sentiment following the release of the trade deal details.
Thursday’s US Retail Sales Next Big Release
The US dollar finished Wednesday’s session marginally higher despite disappointing US inflation data. US inflation increased 2.3% year on year in December, just off 2.4% analysts forecast. With consumer prices increasing at 2.3% and wage growth moderating at 2.9% US household’s spending power is coming under increased pressure. This could well limit the upside in consumer spending and economic growth should the trend continue.
US dollar investors are also looking towards US – China relations. The disappointment surrounding the Chinese tariffs has boosted demand for the safe haven greenback.
Looking ahead, investors could pay some attention to US empire manufacturing results, however any reaction could be limited as investors look ahead to US retail sales data tomorrow.
|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.