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Australian Dollar jumps higher

18 August 2016 by News Desk

Australian Dollar moved higher thanks to a better-than-expected Australian unemployment report.

Australian DollarAustralian Dollar watchers expected Australia’s unemployment rate to remain at 5.8% but instead it dropped to 5.7%, indicating that more people than expected had entered work, according to currency specialists TorFX

Indeed, July’s bumper employment change figure of 26,200 (beating forecasts of 10,000) reflected positively on Australia’s job market and boosted the Australian Dollar.

The Australian Dollar was weighed down by a -45.4k drop in full time employment as the drop in unemployment was due to the huge 71,600 increase in part time roles.

This news, as well as the Reserve Bank of Australia’s (RBA) surprisingly vague minutes report from earlier this week has lowered RBA rate cut bets, meaning the high-yielding ‘Aussie’ is likely to experience further demand in the coming weeks.

New Zealand Dollar (NZD) – The Pound to New Zealand Dollar exchange rate slipped from its weekly highs on Thursday morning as Pound sentiment faded and the New Zealand Dollar was boosted by an increase in demand for its antipodean peer, the Australian Dollar.

Risk-correlated movements have been mixed for the majority of this week, with the ‘Kiwi’ unable to capitalise on solid dairy commodity news. However, there is potential for the New Zealand Dollar to advance further if the ‘Aussie’s current rally inspires markets to buy into other risky assets too.

Australian Dollar jumps higher

Pound Sterling (GBP) – Sterling trended largely flatly against most of its major rivals on Wednesday, as investors were hesitant to drive the currency much higher due to concerns of Bank of England (BoE) stimulus and the economic effects of the Brexit.

April to June’s employment data did little to inspire Pound movement, as the data for these prints had been collected before the outcome of the EU Referendum. However, July’s jobless claims report may have boosted Sterling slightly as it revealed a surprising drop in jobless claims of -8.6k despite analysts expecting 9.0k new claims to have been made throughout the month.

While the figure kept the Pound buoyed, Thursday’s session saw the publication of Britain’s retail sales report, which printed an unexpected increase from -0.9% to 1.4% month-on-month and 4.3% to 5.9% year-on-year.

Sales had been expected to be affected by the Brexit vote, and it is thought that the low value of the Pound as well as hot weather in July increased non-food sales considerably, with consumers buying summer clothing in droves. The news caused Sterling to surge on Thursday morning.

US Dollar (USD) – The Pound fluctuated against the US Dollar for most of Wednesday’s session, but was ultimately able to edge higher due to weakening ‘Greenback’ sentiment. With markets becoming increasingly certain that the Federal Reserve will be unable to make two interest rate hikes this year, the US Dollar selloff continued.

The Fed’s latest minutes meeting revealed a split on whether or not interest rates should be hiked, showing an uncertainty and a hesitance among members. While policymakers indicated that economic conditions would soon reach levels where a rate hike was appropriate, it was clear that this was not enough as members intended to await more positive data before acting.

Following the report’s publication, St. Louis Fed President James Bullard stated that he believed only a single rate hike was necessary, and that he expected rates to remain low for the long-term.

Euro (EUR) – The Pound to Euro exchange rate fluctuated with a downward bias on Wednesday, but vitally was able to hold its ground above the key level of 1.15 after Tuesday afternoon’s recovery. However, GBP/EUR was not able to hold its best levels either, as investors awaited Thursday’s key session. After the release of the UK’s retail sales data, the pair hit 1.16.

Alongside the UK’s retail sales print, the Eurozone’s July Consumer Price Index (CPI) scores as well as the European Central Bank’s (ECB) latest policy meeting minutes have the potential to inspire movement in the Euro today. If the ECB maintains a neutral or even optimistic outlook on the Eurozone’s economic recovery, this could boost the Euro slightly. However, a mixture of bad inflation and a dovish ECB would send stimulus soaring and the Euro would likely fall.

Canadian Dollar (CAD) – The Pound to Canadian Dollar exchange rate trended relatively flatly for most of Wednesday’s session, before slipping slightly from the week’s best levels on Thursday morning as a slight increase in risk sentiment boosted the ‘Loonie’.

As investors sold off the US Dollar amid low Federal Reserve rate hike bets, and the Australian Dollar was boosted by domestic data, some investors sought out higher yielding currencies. News that price of oil had remained sturdy also helped boost the Canadian Dollar slightly, but the oil-correlated ‘Loonie’ was unable to capitalise due to concerns in the market over Saudi Arabia’s aim to break oil output records.

This news contrasted with speculation that oil producing nations could agree to a production cap, which means oil prices will remain pressured. As a result, the ‘Loonie’ may need other factors to give it cause to advance, such as Friday’s Canadian inflation data.

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