Australian Dollar to US Dollar (AUD/USD) Exchange Rate Forecast to Strengthen on Market Sentiment

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United States Dollar (USD)

The Australian Dollar to US Dollar (AUD/USD) exchange rate strengthened by around 0.22% on Tuesday afternoon.

After the EU commission accepted Greece’s proposal for debt repayment, market sentiment improved significantly. The risk-correlated ‘Aussie’ strengthened as a result of improved risk appetite. Aiding market sentiment was a slight rebound in oil prices as Libya closes its largest oil field.

The US Dollar, meanwhile, edged higher as a result of speculation that the Federal Reserve will be the first major central bank to increase the benchmark interest rate. The gains have been somewhat laboured, however, with demand for safe-haven assets cooling.

The Australian Dollar to US Dollar (AUD/USD) exchange rate is currently trending in the region of 0.7815.

Australian Dollar (AUD) Exchange Rate Strengthens on Crude Prices

In addition to easing Grexit fears causing improved risk-appetite, rising crude prices also aided sentiment. However, most experts agree that the gains will be short-lived with oversupply plaguing the market.

‘The fundamental backdrop is still bearish,’ said Carsten Fritsch, senior oil and commodities analyst at Commerzbank in Frankfurt, adding there was a ‘huge over-supply in the market.’

‘We believe that there is still enough low-cost capacity in the US to produce at lower prices, allowing supply to expand again in 2015-16, albeit at a much slower pace than in 2012-14,’ the Economist Intelligence Unit said in its latest global report.

Aiding the ‘Aussie’ gains was an improvement in the ANZ Roy Morgan Weekly Consumer Confidence Index, which gained from 109.8 to 110.8.

The Australian Dollar to US Dollar (AUD/USD) exchange rate dropped to a low of 0.7735 today.

US Dollar (USD) Exchange Rate Edges Higher on Rate Hike Speculation

Although Fed Chair, Janet Yellen, has so far avoided giving a timeline for a cash rate increase, most futures traders predict that the North American institution will be the first major central bank to hike rates.

‘If economic conditions continue to improve, as the committee anticipates, the committee will at some point begin considering an increase in the target range for the federal funds rate on a meeting-by-meeting basis,’ Yellen said. ‘Before then, the committee will change its forward guidance. However, it is important to emphasize that a modification of the forward guidance should not be read as indicating that the committee will necessarily increase the target range in a couple of meetings.’

Australian Dollar to US Dollar (AUD/USD) Exchange Rate Forecast to Hold Gains

With market sentiment much improved, and with little by way of data to curb the trend, the Australian Dollar to US Dollar (AUD/USD) exchange rate is likely to hold gains for the remainder of Tuesday’s trade. Wednesday ought to see heightened AUD/USD volatility with data pertaining to both the US and Australia due for publication.

The Australian Dollar to US Dollar (AUD/USD) exchange rate climbed to a high today of 0.7827.

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