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Australian Dollar boosted by rate hold

01 November 2016 by News Desk

Australian Dollar watchers had been waiting to see whether the RBA would raise interest rates.

Australian DollarAustralian Dollar: While there was no expectation for the Reserve Bank of Australia to cut interest rates last night, markets were still relieved when policy makers remained on hold, according to currency specialists TorFX

The indication that the RBA’s updated forecasts are unlikely to see any change in its quarterly statement offered further encouragement to the Australian Dollar.

With the RBA expected to maintain a more neutral policy bias in the near term, the bias for the Australian Dollar remains to the upside, especially as commodity prices strengthen.

New Zealand Dollar – Confidence in the ‘Kiwi’ strengthened overnight, benefitting as China’s manufacturing and Non-Manufacturing PMIs both bettered forecast in October.

This latest sign of strength from the world’s second largest economy encouraged investors to pile back into higher-yielding assets.

There is likely to be renewed volatility for the New Zealand Dollar this evening though, with domestic labour market data having the potential to dent market sentiment.

Should employment be found to have held steady however, the ‘Kiwi’ could extend its gains further.

Australian Dollar boosted by rate hold

Pound Sterling – Although Sterling initially bounced on the news that Bank of England (BoE) Governor, Mark Carney would be extending his term until 2019, the mood of investors soon deteriorated again. Markets were disappointed that Carney would not be taking the full eight-year term, particularly as they await the latest raft of UK PMIs.

Softness was also prompted by a weakening in the UK Manufacturing PMI for October, which suggests that the domestic economy may not have started the fourth quarter on the strongest footing.

Euro – Demand for the single currency remained a little muted despite Monday’s Eurozone Consumer Price Index and third quarter GDP data matching expectations.

This did not diminish speculation that the European Central Bank (ECB) is likely to extend its quantitative easing program in December, given that inflation remains a long way shy of the 2% target. Nevertheless, the Euro was offered something of a boost by the relative weakness of the US Dollar. Tomorrow’s German employment data could offer a stronger rallying point, providing the conditions prove positive.

US Dollar – Markets have been freshly spooked by developments in the US presidential election, with the gap between the candidates reported to have narrowed somewhat.

As the results of the election are now little more than a week away the US Dollar is likely to come under increased pressure, with the outcome of the vote having potentially far-reaching economic consequences. Jitters are also likely ahead of the Federal Reserve’s November policy meeting, given the rather lacklustre nature of recent domestic data.

Canadian Dollar – The appeal of the Canadian Dollar has remained limited this morning despite the general mood of markets still leaning towards higher risk appetite.

Investors are increasingly anxious about the upcoming OPEC meeting, with Goldman Sachs having noted that any agreement to cut oil output seems increasingly unlikely. This has kept Brent crude trapped below the psychologically important US$50 per barrel mark, although this afternoon’s Canadian GDP data could offer the ‘Loonie’ a boost.

Disclaimer: This update is provided by TorFX, a leading foreign exchange broker, its content is authorised for reuse by affiliates.

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