Australian Dollar hits new low
08 August 2016 by News DeskAustralian Dollar watchers saw the Aussie weaken as higher rate-hike-bets flattened demand for risky investments.
Australian Dollar rates surged higher against most currencies due to a sudden surge in demand for iron ore, according to currency specialists TorFX
Chinese demand for the metal, Australia’s most lucrative commodity, left iron ore over US$60 per tonne as the new week began, boosting the appeal of the Australian Dollar.
New Zealand Dollar (NZD) – The Pound to New Zealand Dollar exchange rate gained around a cent on Friday as the already relatively-weak New Zealand Dollar was undermined by July’s optimistic US Non-Farm Payroll report.
Risk-sensitive currencies like the ‘Kiwi’ struggled to advance on Friday afternoon, but the ‘Kiwi’ also remained held down by the expectation in markets that the Reserve Bank of New Zealand (RBNZ) will cut New Zealand’s overnight rate later this week.
Bets of an RBNZ rate cut were initially mixed during the long period between the bank’s June and August meetings. However, following a surprise economic assessment report a couple of weeks ago, rate cut bets soared and this will likely weigh the ‘Kiwi’ down until the bank meets on Thursday.
Australian Dollar hits new low
Pound Sterling (GBP) – Sterling trended flatly on Friday as investors failed to push the currency higher after Thursday’s surprising Bank of England (BoE) easing measures were announced.
The bank cut UK interest rates from 0.50% to 0.25% as investors expected, but also announced that quantitative easing would be boosted by £60bn. The BoE then went on to outline a £10bn corporate bond purchase scheme and introduce £100bn to give to high street banks to help them ease in the new interest rate.
As a result of the stimulus package, UK gilt yields plummeted to new lows and the Pound lost all its weekly gains against most major currencies.
While British economic news was quiet on Friday, BoE Deputy Governor Ben Broadbent said that he would likely vote for another rate cut in the future if growth does not outperform his expectations.
This may have weighed on the Pound’s attempts to recover, as did the latest US Non-Farm Payrolls report, which saw market focus turn towards the US economy. Sterling continued to slump on Monday morning.
US Dollar (USD) – The Pound to US Dollar exchange rate extended its weekly losses by around a cent last Friday.
Sterling was heavily weakened by Thursday’s Bank of England (BoE) monetary policy announcements, allowing the ‘Greenback’ to easily strengthen after the release of the latest US Non-Farm Payroll report. This key indication of the US job market has long been a vital factor in the health of the US economy and is one of the areas the Federal Reserve pays special attention to.
Following a heavily impressive June NFP a month ago, July’s figures surprised markets once again, revealing that 255,000 new jobs had been created throughout the month, despite expectations for a much lower figure of 180k. Wages grew 2.6% and the average number of hours being worked also increased.
The report led to a surge in appreciation for the US Dollar following a limp week for the currency, and also restarted speculation of a possible September Fed interest rate hike. Rate hike bets plummeted around June as analysts predicted that officials would want to avoid potential Brexit downside risks.
These bets became near non-existent following the UK’s vote to Brexit, but as the vote appears to not have affected the US economy, it’s the US Presidential Election that remains the biggest downside risk for a potential September rate hike.
Euro (EUR) – The Pound to Euro exchange rate extended its three-week-lows on Friday, once more falling close to 1.16. This has caused some analysts to predict new lows for the exchange rate in the future.
An easing of the Bank of England’s (BoE) already thorough monetary policy is among the factors most likely to drive GBP/EUR lower. However, there has also been speculation that the European Central Bank (ECB) could be set to expand its own easing measures to improve Eurozone inflation before the end of the year – which would make it difficult for the Euro to capitalise.
Regardless, the Euro strengthened against most rivals on Monday morning as German industrial production figures came in above expectations, revealing that the sector had returned to growth. Following May’s score of -0.9%, the sector scored 0.8% in June, beating expectations of 0.7%. This brought the yearly score up from -0.4% to 0.5%.
Canadian Dollar (CAD) – The Pound gained over a cent against the Canadian Dollar on Friday, as a brief two-day rally for the ‘Loonie’ abruptly ended on oil prices falling once more as well as news that Canada’s latest labour report had printed surprisingly poorly.
Canadian unemployment worsened from 6.8% to 6.9% in July. While this was expected, the change in employment came in at -31.2k, completely letting down hopes of a 10k increase in the number of employed persons. Higher US rate hike bets also weighed on the risk-correlated ‘Loonie’.
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