Australian Dollar to US Dollar (AUD/USD) Exchange Rate Forecast to Edge Higher after Dovish FOMC Minutes

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United States Dollar (USD)

AUD/USD Conversion Rate Predicted to Advance after Chinese Stocks Rise

The Australian Dollar to US Dollar (AUD/USD) exchange rate advanced by around 0.3% in the early stages of Friday’s European session.

After the Shanghai Composite Index ended the Asian session higher for the second-day on a post-holiday rally, market sentiment improved significantly. This caused the Australian Dollar to advance versus its major peers. Rising gold and iron ore prices also aided Australian Dollar gains.

After having risen by 3.0% on Thursday, China’s equity market ended Friday’s session 1.3% higher. The signs of stability have been attributed to a post-holiday rally after the index was closed for five days. Beijing was required to intervene in order to stimulate stock growth but the impact of this prior to the break in trade has been proven to be temporary.

One thing that has really supported confidence in China’s economic stability was the publication of minutes from the most recent Federal Reserve interest rate decision. The minutes suggested that policymakers would hold off raising rates until China’s recovery is robust enough to withstand it.

This means that the Chinese government has more time to stimulate a recovery, which has had a positive impact on market sentiment and boosted demand for the ‘Aussie’ (AUD).

The Australian Dollar to US Dollar (AUD/USD) exchange rate was trending in the region of 0.7286 during Friday’s London session.

USD/AUD Exchange Rate Forecast to Hold Losses ahead of US Wholesale Data

The dovish Federal Reserve minutes had a detrimental impact on demand for the US Dollar. Policymakers were happy with the state of the domestic economy, but slowing global growth was a significant hurdle in the way of raising rates. Adding to dampened investor confidence with regards to the likelihood of a 2015 rate lift-off was the fact that these minutes pertain to a meeting which preceded a number of disappointing domestic data publications.

With labour market conditions faltering and the International Monetary Fund (IMF) lowering growth forecasts, many traders expect the Fed to delay a benchmark rate hike for a long time to come.

Today’s US economic data is unlikely to be hugely impactful. Wholesale Inventories and Wholesale Trade Sales may provoke US Dollar changes, but damp sentiment is likely to dominate trader focus.

Later today, Federal Reserve Bank of Atlanta President Dennis Lockhart will be giving a speech. Lockhart previously championed the notion of a 2015 rate hike, so it will be interesting to see how he has responded to the recent set of poor domestic data results. Even if he reaffirms his stance that the Fed will hike the cash rate this year, it is doubtful that investors will share in his confidence.

The Australian Dollar to US Dollar (AUD/USD) exchange rate dropped to a low of 0.7256 during Friday’s European session.

AUD/USD Exchange Rate Forecast to Hold Gains on Fed Rate Hike Delays

With US data yet to be published on Friday, there is the potential for AUD/USD volatility. However, with investor confidence weakened by the FOMC minutes, the Australian Dollar to US Dollar exchange rate is likely to hold gains for the remainder of Friday’s European session. Sunday could see ‘Aussie’ volatility with the publication of China’s Aggregate Financing and New Yuan Loans data.

Next week’s focus for the AUD/USD exchange rate will likely be Thursday’s economic docket. Australian Employment Change and Unemployment Rate will be highly significant for those invested in the South Pacific asset. The US Consumer Price Index will also be of considerable importance for US Dollar traders, especially considering inflation is forecast to drop to -0.2% in September.

The Australian Dollar to US Dollar (AUD/USD) exchange rate climbed to a high of 0.7306 during Friday’s European session.

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