Australian Dollar movement mixed
03 August 2016 by csf-adminAustralian Dollar - Sterling was able to gain around half a cent against the Aussie overall on Tuesday.
Australian Dollar movement was thoroughly mixed, initially plummeting following the Reserve Bank of Australia’s decision to cut Australia’s overnight rate from 1.75% to 1.50% before quickly bouncing back, according to currency specialists TorFX
As markets believed the rate cut had already been priced into the value of the Dollar, its losses were minimal.
However, when risk-sentiment dropped later on in Tuesday’s session, Sterling was able to capitalise on a weakened ‘Aussie’ in a ‘short cover’ rally.
New Zealand Dollar (NZD) – The Pound to New Zealand Dollar exchange rate jumped higher on Tuesday as GBP edged higher across the board.
The New Zealand Dollar was unable to hold its ground despite optimistic news for New Zealand’s commodity trade.
Tuesday’s Global Dairy Trade auction ended with prices of milk 6.6% up from their previous levels – the commodity’s highest price since November 2015. While this news would normally have boosted the ‘Kiwi’, markets largely shrugged it off on Tuesday and during Wednesday’s Asian session.
With the Reserve Bank of New Zealand’s (RBNZ) presumed interest rate cut just over a week away, NZD’s appeal is limited outside of risk-on movements.
Australian Dollar movement mixed
Pound Sterling (GBP) – Tuesday’s session saw Sterling climb away from its lows against most of its peers.
Markets drove the Pound higher throughout the day in anticipation that it would likely be knocked down again by economic news on Wednesday and Thursday.
Some analysts have called this uptrend an example of ‘short covering’ – a process of locking in profit and buying an asset to conclude a short-term position.
This also means that these gains will likely be quickly shed off in coming days, but on Wednesday morning the Pound sat at its best levels in over a week against some majors.
Sterling was slightly boosted by Tuesday’s Construction PMI report. While the report revealed that the construction sector contracted at its worst rate since the financial crisis, investors were actually relieved by the 45.9 figure as it was higher than bearish forecasts of 44.
This gave investors hope that the Brexit vote may not have affected all sectors as badly as manufacturing (as revealed by Monday’s Manufacturing PMI).
This will be confirmed (or proven false) on Wednesday amid the release of Services PMI. If these figures disappoint, it will drive Sterling lower ahead of Thursday’s presumed Bank of England (BoE) interest rate cut.
Australian Dollar movement mixed
US Dollar (USD) – The Pound gained around a cent and a half against the US Dollar on Tuesday, hitting its highest level in two weeks as better-than-expected Construction PMI and ‘short covering’ boosted Sterling’s levels.
Low Federal Reserve rate hike bets weighed on the US Dollar throughout the day, with freshly published data doing little to dissuade market bears.
Even recent hawkish comments from New York and Dallas Fed Presidents were unable to give the ‘Greenback’ a prolonged recovery from its recent drops.
The US Dollar has a chance of recovering slightly on Wednesday if ISM’s Services/Non-Manufacturing Composite PMI beats expectations. The figure is currently expected to slip from 56.5 to 55.9. The US Dollar will also be able to recover if UK data disappoints and the BoE introduces an aggressive stimulus package on ‘Super Thursday’.
Euro (EUR) – The Pound to Euro exchange rate was able to climb up from a three-week-low on Tuesday as investors brought Sterling higher ahead of what could be a pivotal ‘Super Thursday’ for the currency.
GBP/EUR gained almost a cent throughout the day despite solid Eurozone news. According to June’s report of the Producer Price Index (PPI), producer prices were up from 0.6% to 0.7% month-on-month, bringing the yearly score up from -3.8% to -3.1%.
This news was good for the European Central Bank (ECB) as it increased hopes that inflation would recover. However, some analysts claimed that the figure meant little for long-term inflation which may have hindered a potential Euro rally.
Wednesday’s session saw the publication of Services and Composite PMIs for the Eurozone. As is to be expected with the Eurozone, the figures were mixed. France’s scores came in above expectations but Germany’s let markets down.
The German print revealed that a preliminary Services forecast of 54.6 was a little optimistic, with the final score being 54.4. German Composite PMI scored at 55.3 as expected.
Overall though, the Eurozone fated better-than-expected. Eurozone Services were up from preliminary scores of 52.7 to 52.9, and the Composite print improved from 52.9 to 52.3. These results could give the Euro a boost going forward, especially if UK data disappoints.
Canadian Dollar (CAD) – The Pound to Canadian Dollar hit a monthly high on Tuesday as a ‘short cover’ rallying Pound was able to easily advance on a floundering Canadian Dollar.
GBP/CAD gained almost two cents throughout the session and began to trade at highs not seen since the last week of June.
However, the ‘Loonie’ could recover these levels in the coming days if bearish Pound forecasts come true.
Markets do not have high hopes for Wednesday’s Services and Composite PMI scores, and a wide majority of economists expect that the Bank of England (BoE) will finally introduce stimulus measures during its ‘Super Thursday’ policy decision tomorrow.
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