Although the Australian Dollar to US Dollar (AUD/USD) exchange rate staged something of a rebound during the South Pacific session, gains were modest and short-lived.
During local trading, slightly disappointing initial jobless and continuing claims figures for the US saw the Australian Dollar eke out gains against the ‘Greenback’.
The Australian Dollar briefly advanced to 0.8425 cents against the US Dollar before falling back to test the 0.8385 level.
The currency’s movement prompted this response from industry expert Stephen Innes; ‘With that in mind, and in the absence of any significant domestic data today, we should expect some pullback from current trading trends as profit-taking and position adjustments set in. The relief rally proved unsustainable given the market’s recent view of the continued downward pressure on rate expectations from the Reserve Bank of Australia. Bets are starting to line up now that the continued downturn in China’s economy could force the RBA to cut interest rates in 2015. It should be interesting to see how this plays out over the next few months.’
Further pressure was applied to the Australian Dollar as the AiG Performance of Construction Index registered a considerable decline.
The construction index fell to 45.4 in November from 53.4 in October, taking it well below the level separating growth from contraction.
The Australian Dollar to US Dollar (AUD/USD) exchange rate fell to a low of 0.8363.
The less-than-impressive result was accompanied by this comment from AiG; ‘This significant loss of momentum was driven by a renewed decline in activity and new orders in November which contributed to a steeper fall in employment and a sharp slowdown in deliveries from suppliers. All four sub-sectors in the Australian PCI experienced weaker activity in November. Despite continued expansion in house building, its rate of increase moderated to its slowest pace since March 2014. Apartment building activity also recorded an easing in growth in response to a second consecutive month of declining new orders.’
Before the weekend additional movement in the Australian Dollar to US Dollar (AUD/USD) exchange rate could follow the publication of the US Non-Farm Payrolls report.
As the performance of the US labour market is a driving force behind the fiscal policy adopted by the Federal Reserve, another strong employment gain could see US rate hike bets brought forward, undermining demand for higher-risk currencies like the ‘Aussie’.
Jobs growth of 230,000 is expected. Investors with an interest in the AUD/USD pairing will also be focusing on the US average earnings figures and looking ahead to next week and the publication of Australia’s own employment stats (due out on the 11th).
The Australian Dollar to US Dollar (AUD/USD) exchange rate was trading in the region of 0.8371.
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