The Australian Dollar fared well against the soft US Dollar yesterday due to supportive iron ore news and US weakness, as well as better than expected manufacturing news out of China
Australian Dollar exchange rates remained consistently high over trading on Thursday, having been pushed up against the US Dollar in particular by supportive Chinese and detrimental US news.
The latest Australian domestic data has been decidedly negative, with yesterday morning’s AiG manufacturing index for August falling into contraction and retail sales in July dropping from 0.1% to 0%.
From further afield, however, data from China has offered greater support, with the August NBS manufacturing PMI rising healthily from contraction at 49.9 points to growth at 50.4.
Iron ore price forecasts have also been favourable of late, despite the expected near-term drop off in demand from China due to clear-sky initiatives ahead of the G20 summit.
The US Dollar failed to make much headway against the Australian Dollar or its other regular peers over Thursday’s trading session, mainly on account of low confidence in the odds of a Fed rate hike taking place in the near-term.
A recent speech from Fed reserve voting member Charles Evans has had this effect, with Evans stating that low US interest rates are here to stay, at least as long as inflation fails to get off the ground. Even should inflation spike up, Evans was dovish on the possibility of hiking the rate, instead saying;
‘If necessary, we could normalize policy much faster than currently envisioned and still keep the pace gradual enough to avoid a disorderly change in financial conditions’.
Other US news out over Thursday’s session covered US manufacturing PMIs for August, which fell for both the Markit and ISM printings.
With no Australian economic announcements due until the coming Monday, the next source of movement for the AUD USD exchange rate pairing will come from the US July trade balance and August change in non-farm payrolls and unemployment rate results.
Respectively, forecasts are for a rise in the current trade deficit, an increase in the payrolls figure by 190k and no change in the current employment rate of 4.9%.
The Australian Dollar US Dollar (AUD USD) exchange rate has been trending in the region of 0.7551 and the US Dollar Australian Dollar (USD AUD) exchange rate has been trending in the region of 1.3246 recently.
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