Continued excitement following a recent announcement from the Reserve Bank of Australia (RBA) is pushing AUD USD exchange rates higher.
The Australian Dollar US Dollar exchange rate has risen 0.2% to 0.7936 thanks to Australia’s strong interest rate outlook and the US’ weak one.
RBA Confidence Continues to Boost Australian Dollar
The Australian Dollar is continuing to benefit from the recent Reserve Bank of Australia (RBA) meeting minutes release.
The accounts document the July 4th monetary policy meeting and reveal that the board has discussed where interest rates should be once the economy has ironed out all its problems.
Markets were excited to see that the estimate was for interest rates of 3.5% – 2% higher than the current official cash rate (OCR), suggesting that there will be several rate hikes in the coming months should the economic data show sufficient strength.
This has ignited risk-appetite; especially considering it seems that the US Federal Reserve will now keep interest rates on hold until 2018.
However, the latest Westpac leading index may give markets some pause for thought.
The reading uses current data to estimate the performance of the economy three to nine months down the line, and has fallen from -0.1% to -0.14%.
This indicates that the pace of economic expansion could weaken, which would force the RBA to leave interest rates frozen.
However, the AUD USD exchange rate continues to make strong advances.
US Dollar Weakens as Markets Await Shift in Interest Rate Outlook
With markets in the mood to buy the risky Australian Dollar, the US Dollar is weakening.
Odds of an interest rate hike in December continue to seesaw, with the market fluctuating between still narrowly predicting a hike to a slim majority expecting to see no change.
This is weighing on appetite for USD, with the ‘Greenback’ also not helped by the fact the US data calendar has been rather sparse of late.
Markets are focused on the big issues and are ignoring the smaller releases, keeping USD soft after several days with no headline data published.
AUD USD Exchange Rate Forecast; Australian Dollar to Take a Hit from Employment Data?
The latest Australian employment data is expected to show a slowdown in the pace of job creation compared to May.
However, the drop to 15,000 may not cause too much alarm, as it is a strong figure and the previous month’s increase of 42,000 was over fourfold what had been expected in the first place.
More perturbing will be the unemployment rate, which economists expect will have risen from 5.5% to 5.6%.
Weaker employment conditions are the last thing markets want to see after the RBA has just talked about a strong economy.
As has become the norm this week, there will be little on the calendar to move the US Dollar.
Although initial and continuing jobless claims are considered medium-impact releases, they would have to print significantly outside of their long-term range to derail the current economic outlook.