Australian Dollar boosted
10 August 2016 by News DeskThe Australian Dollar benefited from domestic data that was largely positive.
The Australian Dollar was also boosted by consumer confidence recovering into optimistic territory and lending to loan growth increasing, according to currency specialists TorFX.
Departing Reserve Bank of Australia Governor Glenn Stevens has said that the government needs to borrow and spend more in order to boost the economy.
This suggests the RBA could be nearing the end of its policy easing bias. Finally, a weak US Dollar has caused investors to hunt for higher yields, driving up demand for the high-risk Australian Dollar.
New Zealand Dollar – The New Zealand Dollar is strengthening ahead of tonight’s Reserve Bank of New Zealand monetary policy meeting; an irony that policymakers won’t appreciate.
Markets are widely expecting an interest rate cut in order to devalue the ‘Kiwi’, but recent US Dollar weakness has pushed the high-yield New Zealand Dollar higher. The RBNZ is going to have to be incredibly dovish in its accompanying statement tonight if it wants to avoid having the ‘Kiwi’ ignore the rate cut and remain bullish.
Australian Dollar boosted
Pound Sterling – The Pound is currently trading uncertainly thanks to the latest developments regarding the Bank of England’s attempts to up its quantitative easing programme.
Threadneedle Street failed to find enough investors willing to sell the amount of bonds it was looking to purchase yesterday, casting shadows over the effectiveness of its newly announced stimulus measures. The Bank wants to buy government bonds so that high demand drives yields lower, making investors in things such as pension funds look elsewhere for returns; such as lending to businesses, which helps boost the UK economy.
Three types of bond the Bank of England hopes to buy – two 19-year and one 20-year bonds – have already seen their yields drop into negative territory, meaning investors would lose money in the long term if they bought them.
Euro – The Euro has been boosted by official confirmation from the European Union that Spain and Portugal won’t face fines after breaching budget deficit targets.
The Iberian nations both significantly exceeded the 3% of GDP maximum for budget deficits; Portugal ran a shortfall of 4.4% of GDP, while Spain’s ran at 5.1% of GDP. EU legislation stipulates that member states may breach these targets in extreme circumstances, which lawmakers have decided applies to Spain and Portugal. Both countries have now been given longer to bring their deficits under control. This, at least temporarily, has removed one point of uncertainty from the outlook of the Eurozone.
US Dollar – Data released yesterday afternoon continues to weigh on the US Dollar today after denting the outlook for the US economy. Non-Farm productivity in the second quarter fell -0.5% instead of growing 0.4% as predicted.
This marked the third consecutive quarter of decline and the longest downtrend in productivity since late 1970. The productivity figure is used as an indicator of future wage growth, inflation and total economic output. The continued decline has therefore lowered optimism, cutting bets that the Federal Reserve will hike rates at any time during the next twelve months. The US Dollar has fallen and today’s mortgage applications figure is unlikely to provide enough support to make traders forget their long-term pessimism.
Canadian Dollar – The Canadian Dollar is mixed today, with crude oil once again on the downtrend. WTI is currently down -1.4%, while Brent has dropped -1.33%. Meanwhile, Finance Minister Bill Morneau has acknowledged that weak global growth is ‘a real challenge’, suggesting that headwinds from outside of Canada could continue weighing on the country’s economic progress.
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