AUD/USD rises to near 0.6620 despite weak Australian Trade Balance data

AUD/USD gains to near 0.6620 even as the Australian Trade Balance data for August came in weaker than expected.
The RBA kept its interest rates steady at 3.6% in the policy meeting this week, as expected.
Weakening US job market has boosted Fed dovish bets.

Sagar Dua FXStreet

The AUD/USD pair trades 0.15% to near 0.6625 during the European trading session on Thursday. The Aussie pair gains despite the Australian Trade Balance data for August coming in weaker than projected.

Earlier in the day, the Australian Bureau of Statistics reported that the Trade Surplus in August came in at 1,825 million on a monthly basis, significantly lower than the estimated 6,500 million and the prior reading of 7,310 million.

Theoretically, soft Trade Balance data weighs on the Australian Dollar (AUD) as the nation’s export market contributes significantly to its overall growth.

Going forward, market expectations for the Reserve Bank of Australia’s (RBA) monetary policy outlook will remain key trigger behind the next move in the Australian Dollar. On Tuesday, the RBA held its Official Cash Rate (OCR) steady at 3.6%, as expected, and warned that inflation is proving to be persistent than what had been anticipated earlier.

“Components of the monthly CPI are a little higher than expected, and inflation is not running away,” RBA Governor Michele Bullock said at a post-meeting press conference.

Meanwhile, the US Dollar (USD) struggles to gain ground as the slowing United States (US) job market has prompted expectations for more interest rate cuts by the Federal Reserve (Fed) this year. The US ADP Employment report showed on Wednesday that the private sector labor force witnessed a reduction of 32K employees in September, while economists anticipated that 50K fresh workers were added in that period.

Another reason behind weakness in the US Dollar is the US government entering a shutdown after the stopgap bill failed to gain a majority in the House of Senate on Tuesday.

Economic Indicator

Trade Balance (MoM)

The trade balance released by the Australian Bureau of Statistics is the difference in the value of its imports and exports of Australian goods. Export data can give an important reflection of Australian growth, while imports provide an indication of domestic demand. Trade Balance gives an early indication of the net export performance. If a steady demand in exchange for Australian exports is seen, that would turn into a positive growth in the trade balance, and that should be positive for the AUD.

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