Australian Dollar holds ground
19 October 2016 by News DeskAustralian Dollar was able to hold its ground slightly better than some other major currencies.
Australian Dollar benefitted as Tuesday’s Australian news indicated that the Reserve Bank of Australia was still maintaining a hawkish stance on monetary policy according to currency specialists TorFX
However, for RBA rates to remain frozen, Australia needs solid employment reports and inflation stats before next month’s policy decision.
This means Australian markets are heavily focused on Thursday’s September employment results, and if these scores disappoint it could easily send the Australian Dollar plunging.
New Zealand Dollar (NZD) – The Pound to New Zealand Dollar exchange rate initially attempted to rally on Tuesday as Sterling surged against other currencies.
However, lingering risk sentiment and solid commodity news left the New Zealand Dollar an appealing investment later in the day.
Tuesday’s Global Dairy Trade (GDT) session relieved fears that prices of New Zealand’s most lucrative commodity were beginning a downtrend in October.
Dairy prices improved by 1.4% in this week’s auction, giving the ‘Kiwi’ significant support and allowing it to hold its ground against a sturdy Pound on Tuesday. GBP/NZD continued to trend flatly on Wednesday as NZD strength remained.
Australian Dollar holds ground
Pound Sterling (GBP) – The Pound finally began a strong rally across the board during Tuesday’s session after trending limply for well over a week on ‘hard Brexit’ worries.
This came as a result of yet more Brexit news, when a High Court lawyer representing the government claimed that any final Brexit deal as negotiations drew to an end in 2019 or beyond would likely need the ratification of an MP vote before it passed into law. After this statement was echoed by Downing Street officials, Sterling soared as investors hoped for an MP vote that favoured as strong a trade deal as possible with the EU.
The day’s British inflation stats didn’t give investors much inspiration despite jumping from 0.6% to 1.0% year-on-year. The Office for National Statistics (ONS) report detailed that Sterling’s drop in value didn’t seem to have been responsible for the surge in CPI, but Bank of England (BoE) policy bets didn’t alter regardless. Instead, most economists still expect the BoE will ease policy further in the coming months.
UK employment results revealed that a smaller number of applications for jobless claims were made in September than expected, and that employment between June and August had been better than expected. This report helped Sterling hold its ground a little better on Wednesday morning rather than shedding more of its Tuesday gains.
US Dollar (USD) – The Pound to US Dollar exchange rate made a solid advance during Tuesday’s session as Sterling surged across the board on new Brexit deal hopes among UK markets.
The US Dollar fared better than its rival the Euro against Sterling’s bullishness thanks to the day’s US Consumer Price Index (CPI). While September’s US inflation scores largely met expectations, improving from 0.2% to 0.3% month-on-month and from 1.1% to 1.5% year-on-year, the solid 1.5% yearly stat still cheered markets and boosted Federal Reserve rate hike bets despite the dovish attitudes of Fed officials in recent weeks.
Some analysts believe that if inflation is high enough by December, the Fed may be pressured to raise interest rates even if some policymakers would rather leave rates ultra-low to fan the flames of US economic activity.
Euro (EUR) – The Pound to Euro exchange rate advanced by over half a cent during Tuesday’s session as Sterling was bolstered by news that British MPs would likely be able to ratify the final Brexit deal. As a result, GBP/EUR reached its best levels in almost two weeks and trended just below these levels on Wednesday.
Euro investors, on the other hand, were slightly disappointed by a consensus in analysts that the European Central Bank (ECB) were not at all likely to begin tapering quantitative easing in this week’s policy meeting. Instead, economists believe the bank will actually extend its QE program in the next few months and could wait until late 2017 before beginning to wind the system back.
Canadian Dollar (CAD) – The Pound to Canadian Dollar exchange rate was able to gain almost a cent in value during Tuesday trade as Sterling surged.
Oil prices continue to rise and confidence in Canada’s primary commodity remains solid. However, as Wednesday’s Bank of Canada (BOC) policy meeting approached, the Canadian Dollar weakened while investors readjusted their positions on the currency.
While the market consensus believes Canadian interest rates will remain on hold once again, speculation that the BOC will continue to play down the possibility of monetary tightening in the face of a possible Fed rate hike in December has left the ‘Loonie’ weaker than its rival the US Dollar.
Disclaimer: This update is provided by TorFX, a leading foreign exchange broker, its content is authorised for reuse by affiliates.
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