AUD/USD Exchange Rate Edges Higher as ‘Aussie’ Benefits from Return of Risk Appetite
The Australian Dollar US Dollar (AUD/USD) exchange rate edged higher today, leaving the pairing trading around $0.678 following a surprise year-on-year rise of 3.3% in Chinese exports in July despite US trade pressures.
Iris Pang, a Greater China Economist at ING, remarked:
‘[China] even exported more crude oil, which is very unusual because China’s crude exports had fallen 61.8% [year-on-year] year-to-date… It is possible that these exports are going to the Belt and Road economies which, if true, could be the start of a new trend for China’s exports.’
As the Chinese economy shows signs of improving, this has bolstered risk-appetite and thus benefiting the risk-correlated Australian Dollar.
Meanwhile, last night saw the Reserve Bank of Australia’s (RBA) Assistant Governor Michel Bullock take a bullish ton, saying that sound financial health of businesses posed no threat to the banks.
Mrs Bullock said:
‘[M]ining firms’ balance sheets [also] appear well-placed to absorb shocks, perhaps more than has been the case for some time. And while some individual sectors and regions do face challenges, these do not currently pose a threat to financial stability.’
USD/AUD Exchange Rate Sinks as Traders Seek Out Riskier Assets
The US Dollar (USD) has struggled today as traders have fled the currency’s safe-haven status for riskier assets like the Australian Dollar.
Fred Bergsten, a former Senior US Treasury official, has stated that US financial markets are becoming increasingly bearish as US economic indicators increasingly show a tilt the negative, which could delay US President Donald Trump’s proposed tariffs on September 1.
‘The economy is a big part of his re-election strategy, so he has to hesitate before he does things that could weaken it. If even he is acknowledging that it’s only ‘ultimately’ that we gain, then I think there’s a chance that he’ll dial it back.’
However, US Dollar traders will be looking ahead to today’s US jobs data for July and August, and with any signs of improvement we could see the ‘Greenback’ claw back some of its losses from the ‘Aussie’.
AUD/USD Outlook: RBA Monetary Policy in Spotlight
Australian Dollar traders will be awaiting tomorrow’s speech from the RBA’S Governor Philip Lowe.
The AUD/USD exchange rate could improve if Mr Lowe shows any signs of bullishness about the Australian economy.
Tomorrow will also see the RBA’S monetary policy statement.
US Dollar investors will be looking ahead to tomorrow’s publication of the year-on-year Producer Price Index for July, which is expected to hold steady.
The AUD/USD exchange rate could becoming increasingly volatile if US-China trade tensions increase over the next few days, as the ‘Aussie’ would suffer from heightened risk-aversion.