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Australian Dollar hit by slowdown

07 December 2016 by News Desk

Australian Dollar was weakened by Reserve Bank of Australia hints of a contraction in GDP at its meeting this week.

Australian DollarAustralian Dollar traders, concerned over the projections, were surprised to learn the actual result was worse than expected, according to currency specialists TorFX

Australian Gross Domestic Product (GDP) was expected to contract at -0.1% quarter-on-quarter in Q3, but instead printed a surprising -0.5%.

This is the primary reason GBP/AUD was able to avoid falling too far on Wednesday, despite the British currency performing poorly against most other majors.

New Zealand Dollar (NZD) – The Pound to New Zealand Dollar exchange rate, like many other Sterling exchange rates on Tuesday, edged higher for half of the day before tumbling from its best levels.

Demand for risk-correlated currencies was weak as oil prices continued to slip from last week’s rally, but the New Zealand Dollar was given a boost as prices of dairy, NZ’s most lucrative commodity, increased for their fourth consecutive Global Dairy Trade (GDT) session.

While prices only increased 3.5%, this was enough to give the ‘Kiwi’ a leg up in Wednesday.

Australian Dollar hit by slowdown

Pound Sterling (GBP) – Sterling edged higher against many major currencies earlier in the week as traders continued to hope for a MP vote on Brexit. The ongoing appeal to the Supreme Court has left traders with hope that Article 50 will be passed through Parliament before it is activated.

However, on Wednesday morning the Pound was undermined amid newfound Brexit jitters. Prime Minister Theresa May suddenly announced that she would reveal the government’s Brexit plans to Parliament so long as MPs agreed to vote for Article 50.

As a result, traders who had still been holding onto hope that the Brexit could somehow be avoided sold the Pound on Wednesday.

US Dollar (USD) – The Pound to US Dollar exchange rate edged to a two-month high on Tuesday, but soon began to tumble. By the end of the day, the pair had fallen around a cent from its best levels and it continued to fall on Wednesday due to fresh Brexit jitters.

US data continued impressing traders, which gave the US Dollar a boost with the highly anticipated December Federal Reserve meeting now only a week away. Tuesday’s American session saw October factory orders improve from 0.6% to 2.7% while durable goods only slipped from 4.8% to 4.6% despite being expected to slow to 3.4%.

While Sterling has performed well against the US Dollar in recent weeks, this week may be the first in a while in which GBP/USD enters the weekend softer.

Euro (EUR) – The Pound to Euro exchange rate attempted to recover on Tuesday, but by the end of the day was slipping as Brexit fears took hold of Sterling trade again. On Tuesday, the suddenness of UK PM May’s U-Turn on revealing her Brexit plans left markets even more jittery and Sterling was sold off.

As for the Euro, investors are still hopeful that the Eurozone will not be hit by nationalist votes as much as Britain or the US were. But the shared currency was slightly weakened by comments from Italy’s Interior Minister Angelino Alfano – who stated a general election was possible as soon as February 2017.

Losses were limited however as the day’s final Eurozone Gross Domestic Product (GDP) results for Q3 indicated that the bloc had grown more than expected. Preliminary readings came in at 1.6% year-on-year, but the final score hit an impressive 1.7%. This gave the Euro a bit of support throughout the day.

Canadian Dollar (CAD) – The Pound to Canadian Dollar exchange rate made advances on soft-Brexit hopes earlier in the week, while oil bullishness began to fade.

As an oil-correlated currency, the Canadian Dollar has benefitted considerably from the recent oil price rallies. However, as oil production ramped up ahead of an agreed production output cut start date, prices of the commodity slipped. This allowed GBP/CAD to briefly reach near multi-month highs earlier in the week.

However, Wednesday saw the Pound tumble from these highs as Brexit jitters began to take hold once again.

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

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