Australian Dollar benefits from OPEC plan
29 November 2016 by News DeskAustralian Dollar benefitted significantly this week from excitement towards the upcoming OPEC meeting, with traders hoping that oil producing nations will come to agree on a comprehensive oil output cap plan.
Australian Dollar was also boosted by hawkish iron ore forecasts.
Some forecasters projected that iron ore was on track to break the key level of US$80 per tonne for the first time in over two years, according to currency specialists TorFX
However, after the commodity broke this level during Tuesday’s Asian session, futures suddenly reversed.
Investors sold both the iron ore commodity as well as the Australian Dollar on profit taking stances.
New Zealand Dollar (NZD) – The Pound to New Zealand Dollar exchange rate tumbled on Monday and struggled to recover on Tuesday morning.
Investors piled into the risky ‘Kiwi’ amid excitement towards Wednesday’s OPEC meeting and strong commodity prices.
However, even as commodity prices slipped the ‘Kiwi’ was able to hold most of its gains against the Pound.
Australian Dollar benefits from OPEC plan
Pound Sterling (GBP) – The Pound shed much of last week’s gains on Monday as traders grew jittery about the ramifications of Brexit. Markets began to doubt that a smooth exit from the European Union was likely as lawyers set out to challenge the UK government on the legality of removing the UK from the single market alongside leaving the European Union.
Some lawyers have argued that the UK withdrawing from the EU doesn’t facilitate also withdrawing from the single market, which is a part of the European Economic Area (EEA). The government would need to activate 127 of the EEA as well as Article 50.
Despite this, Sterling recovered slightly from its worst levels towards the end of the day due to supportive comments from Bank of England (BoE) policymaker Gertjan Vlieghe. Vlieghe stated that the bank’s current monetary policy was helping the UK economy and argued that umbrellas were a consequence of rain rather than a cause, comparing this to low interest rates being a consequence of low inflation rather than a cause.
US Dollar (USD) – The Pound struggled to hold its ground against the US Dollar during Monday’s trade session.
Investors had been profit taking as a result of recent ‘Greenback’ strength, but due to multiple strong underlying factors, USD losses were limited and it eventually advanced against a weak Pound.
Tuesday will see the publication of a few highly anticipated US ecostats, including Q3 Gross Domestic Product (GDP) results and November’s consumer confidence figures. Growth is expected to improve slightly from 2.9% to 3.0%, while consumer confidence is predicted to improve from 98.6 to 101.5.
Euro (EUR) – The Pound to Euro exchange rate slipped from its strong weekend value on Monday as the Pound was sold from its highs in profit-taking.
While the Euro performed strongly in the morning as it was bought from its lows, the shared currency weakened slightly in the afternoon as traders became cautious ahead of comments made by European Central Bank (ECB) President Mario Draghi. However, Draghi worded his speech at the European Parliament carefully and reasserted that the coming year of monetary policy would be made clearer in December’s meeting.
His tone was not as dovish as feared but he did indicate that, regardless of whether it happens in December or not until 2017, an extension of monetary easing was likely. The Euro was able to hold most of its gains against the Pound on Monday, but slipped again on Tuesday despite French growth meeting 1.1% year-on-year in Q3 as expected.
Canadian Dollar (CAD) – The Pound to Canadian Dollar exchange rate plummeted on Monday as traders became increasingly excited about OPEC’s upcoming oil producers meeting. Traders have been anticipating that OPEC and some other oil producing nations may agree to a comprehensive oil output plan in order to stimulate demand and prices for the liquid commodity.
As the ‘Loonie’ is closely correlated to oil, it was the big winner from this excitement on Monday. However, on Tuesday prices of the commodity slipped as hopes dipped. Russia (which is not a member of OPEC) indicated it would not be attending the OPEC meeting after all, causing doubt about the effectiveness of a possible plan in which only OPEC members take part.
While the Canadian Dollar was able to hold most of its Monday gains against the Pound, GBP/CAD recovered slightly on Tuesday morning. GBP/CAD could remain lower until Wednesday’s OPEC meeting, which will dictate in which direction the pair heads for the rest of the week.
Disclaimer: This update is provided by TorFX, a leading foreign exchange broker, its content is authorised for reuse by affiliates.
Learn more about the Australian Dollar – Contact TorFX: Get A Quote
Want to live and work Down Under? Click here for expert help: Skilled Migration to Australia
Want to get a job Down Under? Click here for expert help: How to Get a Job in Australia
Click here for expert help with travel visas: Travel Visas to Australia
Click here for tourist information about Australia: Visit Australia
