At the beginning of the week a lack of Australian data and some disappointing results for the US saw the Australian Dollar to US Dollar (AUD/USD) exchange rate rally. The pairing pushed above 88 US cents and continues to trend in the region of 0.8827.
Higher-risk currencies like the Australian Dollar were bolstered yesterday as the prospect of a Federal Reserve interest rate increase was undermined by below-forecast US Services PMI.
The measure of the US service sector showed the slowest pace of growth for six months and an easing in new business growth.
Markit economist Chris Williamson said this of the result; ‘The flash PMI survey data show the pace of economic growth easing for a fourth consecutive month in October. The weakened growth of new orders and downturn in business optimism suggest that growth and hiring could slow further in coming months.’
Although Williamson went on to note that the ‘pace of growth nevertheless remains robust’, the result is likely to have an impact on the Federal Reserve’s timeline for the first increase in interest rates.
With the Federal Open Market Committee also due to announce the conclusion of its quantitative easing programme this week, every US report will be viewed with interest. A delay to the ending of QE would be beneficial to higher-risk currencies like the ‘Aussie’.
In the hours ahead additional volatility in the Australian Dollar to US Dollar (AUD/USD) exchange rate could be caused by the US Consumer Confidence and Durable Goods Orders data.
Durable Goods Orders are expected to have increased by 0.5% on the month in September following the decline of -18.4 in August.
Similarly, the index of Consumer Confidence is forecast to have edged to 87 from 86. Negative surprises could bolster the ‘Aussie’ before the close of the session.
The Australian Dollar to US Dollar (AUD/USD) exchange rate is currently trending in the region of 0.8828.
Concerning German IFO measures put the Euro on the back foot on Monday and the common currency failed to recover ground after the European Central Bank purchased its first batch of covered bonds.
During the European session the Australian Dollar to Euro (AUD/EUR) exchange rate retained the advance recorded overnight.
The ‘Aussie’ was able to push higher against several of its peers amid bets that the Federal Reserve will revise its timing for the first hike in borrowing costs. Additional Australian Dollar strength came in the form of the domestic Roy Morgan Weekly Consumer Confidence index.
The measure of sentiment climbed from 111.6 to a 12-week high of 114.6 in the week ending October 26th.
ANZ economist Warren Hogan noted; ‘The lift in ANZ-Roy Morgan Consumer Confidence is encouraging. Combined with more evidence last week of a coming pick-up in non-mining business investment and indications that the labour market is gradually strengthening, this gives us more confidence that the gradual transition towards the non-mining economy is continuing. However, consumer confidence clearly remains fragile and we will continue to monitor confidence closely for an early-read on consumption into Q4’.
The AUD/EUR exchange rate was little changed following the publication of Germany’s Import Price Index.
The gauge registered growth of 0.3% on the month instead of the contraction of -0.1% anticipated.
The Australian Dollar to Euro (AUD/EUR) exchange rate is currently trending in the region of 0.6937.
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