An increasingly strong ‘Greenback’ (USD) continues to dominate the softening Australian Dollar (AUD) ahead of the US interest rate decision as the AUD/USD pairing remains near six-year lows.
Turbulent times abound for the ‘Aussie’ (AUD) as the global commodity market has continued to slow over the last week with no significant signs of improvement on the horizon. Friday’s manufacturing PMI report from China, which came in at a disappointing 48.2 instead of the forecast 49.7, has hit all of the major commodity currencies hard. This lack of Chinese demand for imports sent the prices of minerals such as gold, copper and zinc plummeting to fresh lows. However, with stocks having fallen on Monday to levels not seen since 2007, Beijing pledged to intervene, prompting a resurgence that sent the AUD/USD exchange rate pairing climbing to a peak of 0.7321.
For the US a positive result came out of the Durable Goods Order report on Monday, with an increase of 3.4% rather than the expected 3.2%. The figure provided another boost to the ‘Greenback’ and prompted the AUD/USD pairing to begin shedding value once again by the end of the day.
In the early hours of the morning the Consumer Confidence figure for the US was released, showcasing an unexpected shortfall as the index fell from 99.8 to 90.9. It would appear that American consumers have not been sharing the optimism of traders, which caused the AUD/USD pairing to continue trending upwards to a daily peak of 0.7347.
Ahead of next week’s interest rate decision Reserve Bank of Australia (RBA) governor Glenn Stevens will be giving a speech later today that is likely to influence trading. Albeit unlikely, if an imminent rise from the current record-low rate of 2% is indicated to be on the cards there could be a significant upsurge in value for the ‘Aussie’. Pundits predict that the talk may be of cuts rather than hikes, however, which seems unlikely to offer any grounds for a rally by the currency.
July’s rate decision from the Federal Open Market Committee (FOMC) in the US will without a doubt be the cause of some serious exchange rate movement. Although an interest rate hike is highly unlikely this month, the policy statement could well prompt a rally if it offers any indications of an imminent rise. The ‘Buck’ will likely be seeing further bullish trading once the statement is issued, unless policymakers imply that interest rates will remain static for the near future.
But with Monday seeing the release of the Reserve Bank of Australia’s (RBA) corresponding interest rate decision, and employment figures due out later in the week, the ‘Aussie’ may be able to recover some of its losses. Should there be rate cuts, however, it is likely that the currency will find itself softening still further across the board.
At time of writing today the AUD/USD exchange rate was in the region of 0.7323.
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