- China proxy Australian Dollar (AUD) supported by US – China trade talk progress
- US Dollar (USD) remains out of favour following mixed data releases
- US consumer confidence hits new post pandemic low
The Australian Dollar US Dollar (AUD/USD) exchange rate is advancing after trading flat on the first day of the trading week. The pair settled on Monday at US$0.7161 after briefly piercing US$0.72. At 14:00 UTC, AUD/USD trades +0.3% at US$0.7183.
With little headline data released in the previous session the Australian Dollar traded within a tight range, driven by risk flows. The state of Victoria continues to see daily coronavirus numbers trend lower which is supporting the Aussie Dollar, although concerns are growing over the impact that the Melbourne lockdown will have of the Australian economy.
Reports indicating that progress is being made in US – China trade talks is buoying the Aussie Dollar, also known as a China proxy. US trade Representative Robert Lighthizer and Chinese Vice Premier Lui He affirmed their commitment to the Phase 1 trade deal in a biannual review.
US data has been a mixed bag. On the one hand US new home sales soared, yet consumer confidence unexpectedly dropped sharply.
Sales of new US home units increased to the highest level in over 13 years in July, as the US housing market shows incredible resilience to the covid crisis. Despite tens of millions of Americans being unemployed, new home sales rose 13.9%. Analysts had been expecting an increase of just 1.4%.
Consumer confidence dived in August to a new pandemic low after a second wave of coronavirus infections over the summer months turned Americans pessimistic over the economic recovery.
The Conference Board consumer confidence index plunged to 84.8 this month, down from a revised 91.7 last month. Analysts had pencilled in a reading of 93.
Consumer spending had rebounded in recent months. However, as consumers grow increasingly concerned over the economic outlook and their financial position, there is a good chance that consumer spending will slow in the coming months