The AUDUSD currency pair was trading up over 50 pips at the time of publishing, primarily driven by the US dollar’s weakness rather than the Aussie’s strength. The pair has been trading sideways for a while now, with all attempts to rally higher being met with pullbacks.
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The release of weak Australian GDP data yesterday did not do the pair any favours as GDP growth in the third quarter came in at 0.6%, missing analyst estimates of 0.7% and representing a drop from Q2’s 0.9% figure.
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Weak commodity prices are also weighing down the Australian dollar as global demand for metals and other commodities falls amid fears of a global recession starting next year. Australia is a leading exporter of commodities, and weak prices do not bode well for its economy.
The interest rate decision by the Reserve Bank of Australia earlier in the week was largely overshadowed by other market events, especially the US dollar dynamics. Nevertheless, the RBA announced a 25 basis point rate hike, which was wide;y expected, bringing its lending rate to 3.10%.
However, the country’s interest rates trail those of the United States, which currently stands at 4.00%, with the Federal Reserve expected to hike rates by 50 basis points at next week's FOMC meeting. The higher rates have allowed the US dollar to rally against most of its peers.
The AUDUSd currency pair today broke above a crucial resistance level, but there was no strong follow-through buying, which left the pair still stuck in the sideways trading range that has been in place since mid-November.
Higher than-expected continuing jobless claims from the US docket also helped the Aussie rally against the greenback. However, the initial jobless claims data met analysts' expectations of 230,000 claims in the past week.
Investors will be closely monitoring tomorrow’s US PPI data, which will have a significant effect on the currency pair heading into next week and the FOMC’s interest rate decision.
*This is not investment advice.
The AUDUSD price chart.
The AUDUSD currency pair was trading up 50.2 pips (0.75%) at writing, driven mainly by a weak US dollar.
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