Aussie Dollar decline over RBA Cut
23 July 2016 by News DeskAussie Dollar watchers are waiting for key inflation data that could justify further policy easing from the RBA.
Aussie Dollar update – The latest Australian inflation report is only a few days away and markets are becoming increasingly convinced that the result will be a cut in interest rates, according to currency specialists TorFX
By Friday, expectations of a cut had risen to 65%. Earlier predictions had put the odds of a cut at 56%.
With the Aussie Dollar likely to weaken as a result of future policy action, demand for safe-haven Australian government bonds has seen prices pushed higher, lowering yields.
Wednesday will be the most important day this week in terms of Aussie Dollar movement and outlook as it holds the release of the much-anticipated second quarter consumer price index.
Aussie Dollar update
If these figures print well, the Australian Dollar is likely to see bullish appreciation as expectations of a rate cut fall.
Should they show a stagnant or a falling pace of inflation, the ‘Aussie’ will dive due to an increasingly dovish outlook on monetary policy.
Sterling – The shock of the UK’s vote to leave the European Union weighed more heavily on the nation’s economy than had been predicted, according to preliminary PMIs released on Friday.
As a result, the Australian Dollar was able to make bullish gains, despite slumping into negative territory against the rest of its peers. These were the first measures of growth in the post-Brexit environment and all fell into contraction territory.
Manufacturing performed the best out of all the indices, only dropping to 49.1, rather than slumping to 47.5 as anticipated. The services and composite indexes were even more dire than anticipated, with services falling to 47.4, while the composite index slumped to 47.7.
After a quiet start to the week, Wednesday promises some severe Pound volatility with the release of the final second-quarter gross domestic product figures.
Should the figures be revised lower due to stronger-than-expected Brexit shock, the Pound could face selling pressure for the rest of the week.
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