The Federal Open Market Committee’s decision to bring its quantitative easing programme to an end saw the Australian Dollar to US Dollar (AUD/USD) exchange rate drop during the North American session.
Investor’s immediate reaction to the Fed’s policy statement was to ditch higher-risk assets, undermining demand for the Australian Dollar. However, the fact that the Fed is continuing with its policy of keeping interest rates at record lows helped the ‘Aussie’ recoup losses.
The AUD/USD exchange rate recovered over 0.5% and hit a high of 0.8816.
The Australian Dollar was able to continue trading in a stronger position against its US counterpart even as US growth data exceeded forecasts.
While it had been expected that the pace of growth in the US would slow from 4.6% in the second quarter to 3.0% in the third, the world’s largest economy actually expanded at an annualised pace of 3.5%.
The result justified the FOMC’s decision and saw industry expert Nick Timiraos comment; ‘The report showed broad-based gains across the economy despite a drop in inventories. Trade boosted growth as imports fell, while government spending, which has been a drag on growth over the past three years, turned up during the quarter. Consumer spending and business investment held steady, though housing continues to underwhelm.’
With the weekend fast approaching, any additional movement in the AUD/USD pairing is likely to occur as a result of Australia’s Private Sector Credit figures or Producer Price Index. Investors will also be taking a keen interest in US Personal Income/Spending figures and the final University of Michigan Confidence index for October.
The Australian Dollar to US Dollar (AUD/USD) exchange rate is currently trending in the region of 0.8823.
The Australian Dollar to Euro exchange rate jumped by over 0.6% on Thursday as the Euro lost its appeal in the face of disappointing German inflation figures.
The common currency had been supported earlier in the European session by Germany’s better-than-expected jobs stats, but the Euro went on to broadly soften as investors reacted to the news that the pace of inflation in the Eurozone’s largest economy slowed.
German EU harmonised CPI slowed from 0.8% to 0.7% in October rather than rising to 0.9% as expected. Consumer prices fell by -0.3% on the month instead of slipping the -0.1% forecast.
As stated by European economist Francois Cabau; ‘German inflation is another weak data point and will be disappointing in the eyes of the ECB. They will have to revise down growth and inflation forecasts, and in the past that has triggered new measures. It’s increasingly likely that they’ll act again in December.’
Tomorrow the main cause of movement in the AUD/EUR exchange rate is likely to be the publication of the Eurozone’s employment figures and consumer price index for October.
If the CPI for the Eurozone as a whole also slows, the Euro could end the week trending lower.
The Australian Dollar to Euro (AUD/EUR) exchange rate is currently trending in the region of 0.6985.
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