USD AUD Exchange Rate Trends Higher Ahead of US Payrolls Data

March 9, 2017 - Written by John Cameron

STORY LINK USD AUD Exchange Rate Trends Higher Ahead of US Payrolls Data

The US Dollar to Australian Dollar exchange rate fell from its highs on Friday afternoon but remained well above the week’s opening levels.

While the day’s US Non-Farm Payroll report was generally impressive, investors perceived a rate hike from the Fed next week as being priced into the US Dollar and so began to indulge in riskier currencies like the Australian Dollar once again.

[Previously updated 10/03/2017]

A better-than-expected Australian home loans figure helped to boost the ‘Aussie’ ahead of the weekend, with lending rising 0.5% rather than contracting by -1.0% as investors had anticipated.

However, if the afternoon’s US jobs data surprises to the upside this could see the USD AUD exchange rate return to an uptrend, encouraging speculation that the Fed will raise interest rates more aggressively over the course of the year.

[Previously updated 09/03/2017]

Better-than-expected jobs data has helped the US Dollar to Australian Dollar exchange rate to climb sharply this week, with the odds of an imminent Federal Reserve interest rate hike rising.

Upbeat US Jobs Data Extended Bullish US Dollar Run

February’s ADP employment change figure showed an unexpected uptick on the month, with 298,000 new private jobs created on the month rather than the forecast increase of 185,000.

This sharp rise was seen to bode well for Friday’s non-farm payrolls report, giving investors fresh reason to pile into the US Dollar (USD).

As analysts at ANZ noted:

‘After a boomer ADP report, the market is now pricing a 100% chance of a March hike, with a total of 66bps of hikes priced by end 2017.’

A larger dip in continuing jobless claims also helped to shore up the ‘Greenback’ on Thursday, in spite of a bullish Euro putting some downside pressure on USD exchange rates.

While investors have already priced in a high likelihood of the Federal Reserve raising interest rates in the near future this has not prevented the USD AUD exchange rate making further gains, though, with markets increasingly confident of an imminent policy move.

Weaker Chinese Inflation Dented Australian Dollar

With risk appetite generally limited by the strength of the US Dollar there was little in the way of support for the Australian Dollar (AUD).

The commodity-correlated currency was further undermined by an unexpectedly weak Chinese Consumer Price Index, which fell back from 2.5% to 0.8% on the year in February.

This faltering in inflationary pressure suggests that China may not be clear of the threat of a slowdown, potentially limiting its demand for the base metals that continue to fuel Australia’s mining economy.

As January’s Australian home loans data is expected to show that the housing market is slowing somewhat the ‘Aussie’ is unlikely to recover any particular confidence ahead of the weekend.

USD AUD Exchange Rate Forecast: Strong NFP Report Could Boost Fed Hike Bets

The US non-farm payrolls report will be the primary market focus on Friday, with investors keen to see whether the domestic labour market continued to strengthen in the last month.

If the figures back up the positive ADP data then the US Dollar could experience a fresh boost across the board, particularly if the unemployment rate is found to have fallen from 4.8% to 4.7% as anticipated.

A strong showing here would increase the pressure on the Fed to take a more aggressive approach to interest rate hikes, raising the odds of rates being raised even four times over the coming year.

However, if the jobs data does not live up to expectations then this could boost risk appetite and see the USD AUD exchange rate ceding some of its gains, at least temporarily.

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TAGS: Australian Dollar Forecasts Currency Predictions