Aussie dollar forecast Q2 2016
30 June 2016 by News DeskThis Quarterly FX Forecast for April to June 2016 provides guidance on recent currency trends and the Aussie dollar.
It was a curious three months for the Aussie dollar as it was for commodity-related and safe-haven currencies alike, according to the following report by www.fcexchange.com
For the Aussie dollar, sharp falls in Chinese equities, low oil prices and variable global economic data were balanced by renewed money-printing by the European and Japanese central banks and by the US Federal Reserve’s reluctance to pursue the rate increase strategy it began in December.
Backing up the Aussie dollar was the Reserve Bank of Australia, which in March kept its benchmark Cash Rate steady at 2% for an eleventh month and again in April. The RBA did warn after its mid-March meeting that the board had become more inclined to lower the Cash Rate if inflation were to remain low. However, investors see no immediate threat of such a move.
Strong currency – Against the US dollar, the Aussie has recovered to the lower levels of the range it occupied in the first half of last year. RBA governor Glen Stevens observed recently that “the currency might be getting ahead of itself.” It was more of a comment than a threat but if the RBA were to have an eye on a rate cut an unhelpfully strong currency might help it make the decision.
China – The Australian dollar survived the buffeting in Chinese financial markets earlier this year with scarcely a bruise. That is not to say it has become immune to economic developments in China. If the anticipated economic soft landing were to become bumpy, Australia would feel the effect.
Services sector – With the decline of mining, the services sector has picked up some of the slack. More than half of the 3.0% expansion in Australia’s gross domestic profit last year was created by services activity. But little more than a third of business investment goes into services and there is concern that the sector is not operating to its full potential. But little more than a third of business investment goes into services and there is concern that the sector is not operating to its full potential.
The Aussie Dollar Q2 2016
Since the pound topped out last summer, it has been on the retreat against the Aussie dollar.
This retreat accelerated in February after the UK prime minister announced the date the referendum on EU membership.
At the very beginning of the year the Aussie was knocked off course by a sharp sell-off in the Shanghai stock market and a rush by investors for the protection of the safe-haven Japanese yen, US dollar and the euro.
However, that burst of confusion proved to be a blessing in disguise when it contributed to the US Federal Reserve’s decision to hold back from raising interest rates.
Monetary easing in Japan and the euro zone also helped the Australian dollar. Sterling, meanwhile, was quaking in the shadow of the June referendum.
Investors will remain wary of the pound until Brexit uncertainty is out of the way. Their caution left sterling with a -7% loss during the three months from April to June 2016.
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