The Australian Dollar to US Dollar Exchange rate continues to show weakness, in spite of the temporary reprieve provided by the Reserve Bank of Australia (RBA) keeping rates on hold last week.
The AUD/USD made it to a high of 76.49 US Cents during yesterday’s trading session however wasn’t able to hold with investors still showing a lack of confidence in the ‘Aussie’.
Yesterday NAB released their Business Confidence Index which was a positive improvement coming in at 3 after last month’s concerning result of zero, however this provided the AUD/USD with only small gains of up to half a percent against most of the majors. The rise is in business confidence was mostly relating to the mining sector however the retail sector score fell into a negative result.
ANZ economists said that it was surprising that the mining sector was showing confidence given the continuing decline in iron ore pricing, and commented that the real concern for business confidence is the upcoming federal budget due to be delivered next month. ‘The budget and its reception will be very important’.
In addition to these factors impacting market sentiment the overall outlook is still being weighed down by market expectation of a rate cut within the short term future and overall strength in the US Dollar.
The AUD/USD Exchange rate was able to make half a percent gain during the offshore session last night with the release of some disappointing US Data in the form of Retail Sales for the month of March which rose less than the forecast, sales increased by 0.9%. Whilst this was an improvement on the February result which was a reduction of 0.5% from the month of January it disappointed the economists forecast of 1.1%.
This, in combination with a below forecasted result in Producer Price Index (PPI), with a rise of only 0.2% against the forecasted 0.3%, caused a sell-off in the US Dollar.
Some economists still remain positive about the outlook for the American economy; this was the first month in 4 months that the US has released a gain in retail spending.
Chief economist at RDQ Economics in New York, John Ryding stated, ‘We do not, however, see this as a sign of slowing in the economy since the fundamentals for consumer spending remain positive. we expect a strong rebound in spending in the spring.’
The week ahead will be focused locally on the Asian markets for fluctuations to this currency pairing with the release of Gross Domestic Product (GBP) out of China today and Unemployment data out of Australia on Thursday.
The GDP Figure is due out of China at midday today; the figure is forecast for a reduction from 7.3% down to 7.0%. China released their Trade Balance figure on Monday which came in with a significantly different result to the forecast at 3.1 Billion from a forecasted result of 43.4B. Markets will be awaiting this GDP figure release out of China today with anticipation to provide a key indicator for how this major export partner is fairing. Any reduction to the figure forecasted is likely to cause Australian Dollar weakness.