The Australian Dollar made a number of gains against its currency peers during Monday’s trading session, thanks mainly to low confidence over the US’s economic prospects.
The US Dollar’s depleted state was brought about by a lack of domestic input, as well as concerns that prolonged low US interest rates may result in damage to the nation’s economy.
Australian Dollar exchange rate movement was broadly positive over Monday’s trading session, although the scattering of gains recorded were not indicative of overall investor sentiment towards the ‘Aussie’.
In particular, while the Australian currency did rise due to weakness in the US, domestic data was far less supportive, with the AiG services index for August showing a sizable drop from 53.9 into the contraction range at 45.
In commodities news, the cost of iron ore remained in doubt, due to Chinese demand being cut off due to operations to clear the skies for the G20 Summit in China.
Other Australian economic news was more mixed in its outcome, with the ANZ job advertisements figure for August rising out of a negative range, along with the gross company profits figure for the same month.
The US Dollar was in a bad way during Monday’s trading, with notable losses being recorded against virtually all of USD’s regular peers. This is partly due to Labor Day, which has prevented any real economic activity taking place.
The lack of any real investor interest also came from the US’s economic situation, where a continuous stream of positive and negative data, as well as hawkish and dovish Fed statements have left the US Dollar in low demand and concerns about future US growth prospects high on the agenda.
In particular, Fed official Jeffrey Lacker has stated that;
‘It appears that the funds rate should be significantly higher than it is now’.
This, however, comes at a time when the chances of a Fed rate hike in September are as low as 20%, which means more investor anxiety from such a statement, instead of confidence.
Australia will bring the next major data likely to move the AUD USD exchange rate pairing, when the Reserve Bank of Australia (RBA) interest rate decision is announced in the afternoon. This has been forecast to bring a rate freeze at the current 1.5%.
From the US, incoming announcements are expected to consist of declining August composite and services PMI results late at night, as well as an early pessimistically-predicted non-manufacturing PMI for August on Wednesday morning.
The Australian Dollar US Dollar (AUD USD) exchange rate was trending in the region of 0.7584 and the US Dollar Australian Dollar (USD AUD) exchange rate was trending in the region of 1.3189 today.
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