australian-dollar-bank-notes- AUD
  • Australian Dollar (AUD) is trading lower against a stronger US Dollar
  • Fed are in no rush to raise interest rates, driving USD higher
  • Australian unemployment unexpectedly falls

The Australian Dollar US Dollar exchange rate is trending lower on Thursday, snapping a four day winning streak. The pair is trading -0.3% at US$0.7285, this is towards the lower end of the daily traded range, but off the low of US$0.7255.

The US Dollar is trading higher across the board following the US Federal Reserve monetary policy announcement yesterday. The Fed, as expected, kept interest rates on hold. The central bank also indicated that it would leave interest on hold until inflation picked up significantly, which is expected to be through 2023.

The central bank upwardly revised this year’s economic growth forecast, expecting GDP contraction of -3.7%, an improvement from a contraction of -6.5%. The Fed also sees unemployment at 7.6% by the end of the year, down from 9.3%. However, the Fed downwardly revised next years’ forecast to 4% growth from 5%.

The broadly upbeat assessment from the Fed, meant that they are in no rush to introduce additional stimulus. This created a risk off mood in the market, boosting the safe haven US Dollar whilst dragging on riskier currencies such as the Australian Dollar, Other riskier assets such as stocks were also out of favour.

Domestic Australian data was supportive of the Aussie Dollar and capped losses. The Australian unemployment rate declined to 6.8% in August, down from 7.5% in July. Analysts had expected an increase to 7.8%.  The Reserve Bank of Australia had forecast that the unemployment rate would reach 10% by the end of the year. However, analysts now say that an 8.5% unemployment rate is more likely.

The US labour marker was also in focus with US initial jobless claims increasing by 860,000 last week, down slightly from the upwardly revised 893,000 the week before. This was above analysts’ forecasts of 850,000. The data supported the idea that the recovery in the labour market is slowing.