Article by AlgosysFx Forex Trading Solutions
The US dollar is seen to lose ground opposite the Australian dollar today as weak economic data from the world’s largest economy and a positive jobs report from the Land Down Under is believed to improve sentiment for the Aussie. A rather downbeat Beige Book from the Federal Reserve yesterday and expected bleak trade and labor figures from the US is foreseen to underscore the fragility of the US economy.
The Fed reported yesterday that economic activity was expanding modestly last month, supported by improvements in housing and auto sales, though pockets of weakness and strained labor markets remain a problem in some districts. In its September Beige Book report, which is based on accounts from the 12 district Fed banks, the central bank said that hiring conditions were little changed though labor market activity in New York and Chicago weakened. Consumer spending appeared to be holding up despite the soft jobs market. Nevertheless, the pace of growth seemed consistent with the US economy’s recent track record of weakness. According to economists, describing an economy expanding modestly is a softer tone from the Fed’s previous reports describing it as a moderate expansion. Second-quarter growth came in at a meager 1.3 percent annual rate, and the report suggests that the US economy failed to recover strongly in Q3.
Today, the US Labor Department is awaited to reveal that the number of individuals claiming jobless related benefits edged up last week, another sign that the labor sector remains sluggish. Unemployment Claims is estimated to have inclined from 367,000 to 368,000 last week. The increase suggests that businesses continue to take a more cautious stance amid the uncertainty related to the upcoming presidential election, domestic fiscal policy, and the lingering European debt issues. Meanwhile, higher crude oil costs and slower global growth are deemed to have increased the US trade deficit in August. The trade gap is projected to have widened from $42 Billion in July to $44.1 Billion in August. The recent pickup in the cost of energy could push up the nation’s import bill and costs for American companies. At the same time, a recessionary environment in Europe and slower growth in China and other emerging markets have likely curbed demand for US products. With exports providing a source of strength for the economic expansion in the second quarter, weaker trade figures likewise suggest another modest reading in the September quarter.
Meanwhile, the Aussie will likely be supported by upbeat labor market figures for September. The Australian economy created 14,500 jobs last month, exceeding forecasts of a 5,100 increase. Although the jobless rate rose from 5.1 percent to an almost two-and-a-half year high of 5.4 percent, that was because more people looked for work. The participation rate, or the proportion of working-age Australian looking for a job inclined from 65.0 percent to 65.2 percent in September. Considering these, a short position is advised for the AUD/USD trades today.
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