Pound US Dollar Volatility Expected as Federal Reserve May Hike Rates
  • US Dollar (USD) weakens as investors expect a dovish Fed
  • US GDP is revised higher to -31.7% on an annual basis, initial jobless claims remain over 1 million
  • Australian Dollar (AUD) boosted by domestic data as business spending slumps by less than forecast
  • Australian coronavirus numbers improve

The Australian Dollar US Dollar (AUD/USD) exchange rate is gaining altitude for a third straight session on Thursday. The pair is on track for weekly gains in the region of 1.3%.

At 13:00 UTC, AUD/USD trades +0.4% at US$0.7258. This is at the upper end of the daily traded range and at the top of the weekly trading range.

The Australian Dollar is taking advantage of a weaker US counterpart ahead of Jerome Powell’s pivotal speech.

The Fed chair is expected to lay out a change to policy framework which will mean lower interest rates for a longer period of time. Should Jerome Powell announce or even hint towards a shift in the way that the central bank handles inflation, the US Dollar could lose ground.

Dovish expectations from the Fed Chair are overshadowing an upward revision to Q2 US GDP. The US economy contracted by -31.7% on an annual basis, an improvement on the -32.5% in the first estimate.

Whilst GDP data was mildly encouraging, the same could not be said for initial jobless claims figures. Over 1 million Americans signed up for unemployment benefits in the US in the week ending August 22nd.  The reading comes following the upwardly revised 1.1 million signing up the week before. The fact that initial claims remain over 1 million indicate that the US labour market remains highly stressed.

Australian domestic data was supportive of the Aussie Dollar as business spending fell by less than forecast in the April – June period. Business investing slumped by -5.9%, significantly better that the -8.4% analysts had been expecting.

Adding to the upbeat mood surrounding the Australian Dollar is improving coronavirus statistics. The state of Victoria recorded the fewest number of new infections in a month. With just 222 new cases there is growing optimism that the government is gaining control over the outbreak.