- US Dollar (USD) boosted by safe haven flows
- Fed Powell to advocate additional fiscal support
- Australian Dollar (AUD) under pressure as RBA’S Debelle hints at valuation concerns
- Retail sales & PMI data in focus
The Australian Dollar US Dollar (AUD/USD) exchange rate is trading lower for its third straight session. The pair settled on Monday -0.9% at US$0.7223. At 14:30 UTC, AUD/USD trades -0.3% at US$0.7200. This is approximately in the middle of the daily traded range.
The US Dollar is pushing higher as Federal Reserve Chair Jerome Powell and US Treasury Secretary are set to testfify before the Federal House Financial Services Committee. Jerome Powell testimony is expected to be about the Fed’s response to the coronavirus crisis. He is expected to acknowledge a marked economic improvement whilst also highlighting the uncertainties that remain.
The Fed Chair is expected to also pressurise US law makers for more stimulus spending as the US economy attempts to recover from the coronavirus crisis. The Democrats and the Republicans have been unable to reach an agreement over another rescue package since the $600 supplementary unemployment benefit expired back in July. The lack of an agreement and the failure to bring another fiscal support package is unnerving the markets, boosting safe haven flows into the US Dollar.
Investors are nervous that without the stimulus package, the US economic recovery will stall.
Data today showed that US home sales surged to their highest level in almost 14 years in August, as the US housing market outperforms the broader economy.
The Australian Dollar traded on the back foot following a speech by Reserve Bank of Australia’s Deputy Governor Guy Debelle. Debelle touched on the value of the Aussi Dollar and on negative interest rates.
Debelle said that “a lower exchange rate would definitely be beneficial for the Australian economy”. These comments caught Australian Dollar investors off guard given that the RBA have not previously expressed any concerns over the value of the Aussie Dollar.
Looking ahead, Australian investors will focus on the release of manufacturing and service sector PMI data which is due to be released on Tuesday morning local time. Retail sales are also expected to be released.