- Australian Dollar (AUD) rises as risk sentiment lifts following strong US durable goods orders
- Durable goods jumped 11.2% vs 4.3% forecast
- Federal Reserve Chair Jerome Powell’s speech in focus
- Fed expected to signal acceptance of above target inflation
The Australian Dollar US Dollar (AUD/USD) exchange rate is trading higher, extending gains for a second session. The pair settled on Wednesday +0.46% at US$0.7194. At 14:00 UTC, AUD/USD trades +0.25% at US$0.7214. This it at the upper end of the daily traded range.
The Aussie Dollar is being lifted by an improved mood in the market. After a depressed start, market sentiment has picked up following stronger than forecast US durable goods and on hopes of a more dovish Fed.
US durable goods unexpectedly shot higher in July by more than double what analysts were expecting. According to the Commerce Department durable goods orders increased by $23.2 billion or 11.2% in July, adding to 7.7% gains in June and well ahead of the 4.3% expected.
A continued surge in automobile demand suggests that factories and manufacturing will underpin the economic rebound in the coming months.
This was the third straight month of that durable goods orders increased indicating that the recovery in the manufacturing sector continues to gain momentum.
Whilst investors cheered the good news, there were some pockets of concern. The underlying gauge of business investment slowed highlight the fact that firms remain cautious and hesitant to invest.
Attention will now turn to the Jackson Hole symposium tomorrow and Federal Reserve Chair Jerome Powell who is expected to take to the virtual stage and provide some clues as to the direction of monetary policy.
Analysts are expecting Fed Chair Powell to pre-announce the findings of the Monetary Policy framework review, which suggest the adoption of average inflation targeting. An indication that the Fed is happy for inflation to run above the 2% target essentially means low rates for longer and could weigh on demand for the US Dollar.
In addition to the Jackson Hole symposium tomorrow, US GDP data and initial jobless claims will also be in focus.
