The Australian dollar trended lower through the majority of last week, with the risk-sensitive currency struggling to attract support as a gloomy market mood prevailed through most of the session.
Focus largely fell on the better-than-expected unemployment rate, which fell from 10.2% to 8.4%, in spite of the headline miss.
Added to this, August’s ISM PMI figures showed the US private sector continued expanding at a healthy pace.
This encouraged bets that the world’s largest economy is continuing to shake off the weakness brought on by the Covid-19 pandemic, even though underlying signs of vulnerability remain.
With investors selling out of higher-yielding assets once again, the US dollar also benefitted, gaining further ground thanks to its safe-haven status.
This should limit the potential for any USD exchange rate losses in the near term as long as a sense of anxiety continues to weigh on market sentiment.
Turning to this week’s session, the return of the US Senate and House of Representatives and progress on the latest US fiscal stimulus package will drive movement in USD exchange rates.
The last US fiscal stimulus package ended in July, and a new one remained at an impasse before the month-long summer recess.
With the lack of progress dragging on the US economy, USD investors will hope progress is made quickly when they return on Tuesday.
Added to this, August’s inflation rate reading may prompt the US dollar to extend its bullish run, with forecasts suggesting a slight uptick on the year.
Even so, thanks to the Federal Reserve’s softer policy approach, anything short of a major increase in inflationary pressure could struggle to give USD exchange rates any marked boost.
Joining the corporate trading desk in 2007, Phil now over sees all of Currencies Direct’s corporate dealing activity. Having gained experience working with hundreds of businesses to optimise international payments processes and execute comprehensive risk management strategies, Phil currently works with a portfolio of corporate clients whilst managing Currencies Direct’s overall market exposure
Phil has FCA approval and has completed the Certificate in International Treasury Management (CertiTM)