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Australian Dollar loses two cents

04 October 2016 by News Desk

Australian Dollar slipped slightly from its highs against other majors on Tuesday but demand for the currency remained solid.

Australian DollarAustralian Dollar benefited from the latest policy decision from the Reserve Bank of Australia (RBA), according to currency specialists TorFX

As the bank’s first meeting with new Governor Philip Lowe at the helm, the RBA did little to hint at much in the way of future policy action.

Instead it repeated September’s neutral tone – indicating to markets that the bank still intended to leave rates on hold for the foreseeable future. This is likely to be a factor of strength for the Australian Dollar going forward.

New Zealand Dollar (NZD) – The Pound to New Zealand Dollar exchange rate neared its 2016 lows once again on Monday. GBP NZD dropped even lower on Tuesday, extending its all-time-worst levels as Brexit jitters took hold of Pound trade.

Tuesday’s session will likely see the New Zealand Dollar react to the latest global dairy trade auction results, as the commodity-correlated ‘Kiwi’ reacts to New Zealand’s primary commodity, dairy.

Investors piled into the ‘Kiwi’ ahead of the results, but if dairy prices fall after four sessions of improvements, the New Zealand Dollar could plunge.

Australian Dollar loses two cents

Pound Sterling (GBP) – Investors reacted to the weekend’s news for most of Monday’s trade session, selling off the Pound en masse and (in many cases) taking it to new post-Brexit lows. Over the weekend, UK Prime Minister Theresa May revealed that she planned to activate Article 50 and begin the formal Brexit process by the end of March 2017.

This sent UK markets into a panic due to widespread speculation that British officials would not be fighting for access to the European Union’s single market – which is seen as an essential for UK traders. To make matters worse, Theresa May’s recent comments have indicated that officials were indeed aiming for this ‘hard Brexit’, causing even more weakness in Sterling.

Monday’s UK data actually came in well above expectations, with Markit’s September Manufacturing PMI jumping from 53.4 to 55.4, marking yet another uptick for the print after August’s better-than-expected score. Construction also beat expectations when results were published on Tuesday morning, escaping contraction and improving from 49.2 to 52.3.

US Dollar (USD) – The Pound to US Dollar exchange rate hit new 2016 worst levels on Monday evening and Tuesday morning, once again trending at lows not seen in 31 years as Sterling was sold off on Brexit jitters. ‘Cable’ still has potential to hit new lows later in the year if Sterling pressure continues to mount, but the pair could recover if this week’s British data beats expectations.

The US Dollar, on the other hand, strengthened on Monday as September’s US Manufacturing results came in above expectations. Markit’s final print saw Manufacturing beat projections of 51.4, scoring 51.5. ISM’s print improved from 49.4 to 51.5. As a result, the US Dollar remained one of the sturdier currencies during Tuesday’s trade session.

Euro (EUR) – The Pound to Euro exchange rate hit new 2016 lows on Monday’s session, and extended these lows on Tuesday morning as Sterling was sold off amid Brexit concerns. GBP EUR currently trends around levels not seen in over three years.

Monday’s Eurozone Manufacturing PMI came in above expectations for Italy and France, with Germany’s solid score meeting preliminary figures. The Euro may have also been given a small boost by comments from European Central Bank (ECB) official Yves Mersch. Mersch stated that further stimulus measures from the bank could backfire, stoking further speculation that the ECB was nearing the end of its recent easing cycle.

Canadian Dollar (CAD) – The Pound to Canadian Dollar exchange rate has lost around two cents in value since markets opened for the week due to a market-wide Sterling selloff. However, the ‘Loonie’ saw its own little boost on Monday as prices of oil, Canada’s most lucrative commodity, held above the key level of US$50 per barrel.

While oil prices slipped slightly on Tuesday, the Canadian Dollar was able to hold its highs amid hopes for further details of OPEC’s oil output cap deal.

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

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