The Australia Dollar to US Dollar (AUD/USD) exchange rate to stay under US80 cents.
According to the Westpac Bank the Australian Dollar will stay under US80¢, despite US Gross Domestic Product (GDP) data out on Friday this week that will probably indicate the US economy is contracting. The annualised figure for April came in at 0.2% growth, but the May result is forecast to show a decline to -0.9%. Such a result may make it very hard for the US Federal Reserve to lift interest rates in coming months and should put downward pressure on the US Dollar and upward pressure on the Australian Dollar.
However, Westpac Currency Analyst Rob Rennie has said that the Australian Dollar would not return to mid-May’s high of US81.53¢. “The Australian dollar is likely to remain in a US78.50¢ to US80¢ trading range through next week, but Westpac continues to forecast further weakness in the currency as the year progresses, “we expect to see the Australian dollar trading down around US73¢ by year’s end.”
Despite any concerns about the recovery of the US economy, the US Dollar has gravitated towards a four week high against a basket of currencies. Overnight the US Dollar continued to strengthen and was buoyed by the release of positive US Durable Goods Orders figures. “The data wasn’t extraordinary but good enough for a return to considering higher US interest rates this year” NAB senior currency strategist Emma Lawson said this morning.
The Australian Dollar was trading at 0.7794 US Dollars at close of trade on Monday, down from 0.7840 on Monday morning. The Australian Dollar to US Dollar (AUD/USD) exchange rate was trading at 0.7730 US dollars at 08:30 AEST today.
Will the US Dollar do the job the Reserve Bank of Australia (RBA) couldn’t???
After the Australian Dollar thumbed its nose at the Reserve Bank of Australia’s (RBA) attempt to devalue the currency with a cut to the official cash rate in May, it looks like the strengthening US Dollar will do what the RBA couldn’t with the Australian Dollar finally starting to slip against the greenback. Regardless of the reasons why; RBA officials are taking comfort in the fact that the Australian Dollar is weakening.
The Australian Dollar declined 0.6% on Friday night as US inflation came in at 1.8% instead of 1.7% and as US Federal Reserve Chair Janet Yellen indicated that a rate rise sometime this year was still on the cards.
This decline followed the US Federal Open Market Committee deliberations which suggested that policy makers are looking past Q1 economic weakness, stating that they remain on course to raise interest rates before the end of the year.
With no high tier data out this week impacting the Australian Dollar to US Dollar currency pairing, all eyes will be looking to Friday night to see the impact of the US GDP release.