The US Dollar climbed significantly against the Australian Dollar on Thursday after upbeat US labour market data and weak Aussie stats emerged, while the US Dollar to Pound Sterling (USD/GBP) and US Dollar to Euro (USD/EUR) exchange rates declined moderately as the European currencies remained buoyant.
US Dollar (USD) Exchange Rate Forecast: Labour Market Data to Cause Major Federal Reserve Rate Hike Speculation
The US Dollar (USD) climbed by over 1.0% against the Australian Dollar (AUD) as investors prepared for an upbeat US Change in Non-Farm Payrolls and Unemployment Rate figure on Friday. Forecasts suggest the US Change in Non-Farm Payrolls figure will come in at 227K in May, following April’s 223K while the US Unemployment Rate is predicted to remain at 5.4%.
As the US Federal Reserve has placed such heavy emphasis on the connection between a strong labour market and interest rate hikes, the US Dollar (USD) is extremely sensitive to any employment data.
Wednesday’s ADP US Employment Change figure came in at 201K in May rather than the 200K forecast and spurred hopes that the indicator would translate into an upbeat payrolls stat on Friday.
BoE 12-Month Inflation Forecast Expected to Cause Significant Pound Sterling (GBP) Exchange Rate Movement
Meanwhile, the Pound (GBP) exchange rate was trending higher after upbeat UK data printed favourably and the Bank of England (BoE) opted to keep interest rates stable at 0.50%.
However, Friday could be another influential day for the Pound Sterling (GBP) exchange rate with the Bank of England (BoE) due to release its 12-Month Inflation Forecast. Any comments from the central bank are likely to be taken very seriously and can have a significant impact on the market.
Euro (EUR) Exchange Rate Sensitive as Greece Situation Unfolds
Meanwhile, the Euro (EUR) exchange rate is also likely to finish the week with a bang with the situation between Greece and its creditors unfolding. Greece is due to make its next International Monetary Fund (IMF) repayment on Friday but rumours are circulating that the institution would allow Greece to bundle up all its June payments into one singular package at the end of the month.
Usually a default in a payment to the IMF (something that no other developed nation has done before), would have massive consequences; in this case, those consequences would be a Greek exit (Grexit).
The Greek government’s reform proposal has also been leaked and we’ll have to wait until tomorrow to find out if creditors are likely to accept Greece’s plans or make a counter proposal.
Australian Dollar (AUD) Exchange Rate Flops Following Massive Trade Deficit
The Australian Dollar (AUD) also had a bad day in the market when Australian domestic data printed unfavourably. The Australian Retail Sales stat came in at 0.0% in April on the month, while the Australian trade deficit widened to the largest on record at 3.9B.
Deutsche Bank commented on the situation, saying: ‘While the deficit was significantly wider than we expected in April, it appears that (temporary) weather conditions have played an important role behind the sharp fall in coal, while a fall in iron ore export quantities in the month exacerbated the (ongoing) weakness in prices. This ongoing price weakness had been somewhat suppressed in March by a sizeable increase in export quantities.’
The US Dollar to Pound Sterling (USD/GBP) exchange rate is trending in the region of 0.6529. The US Dollar to Australian Dollar (USD/AUD) exchange rate is trending at 1.3018. The US Dollar to Euro (USD/EUR) exchange rate is trending in the vicinity of 0.8877.
