Australian Dollar rate struggles

05 October 2016 by News Desk   |   SHARE  

Australian Dollar struggled as Sterling failed to see any support despite optimistic PMIs and a solid UK growth forecast from the IMF.

Australian Dollar struggled to capitalise on Sterling’s weakness throughout the day as demand for risk-correlated currencies was mixed, according to currency specialists TorFX

The Australian Dollar was one of the day’s stronger risk currencies due to an optimistically neutral stance from the Reserve Bank of Australia and slipping demand for its rival, the New Zealand Dollar.

New Zealand Dollar (NZD) – The Pound to New Zealand Dollar exchange rate extended its worst record levels once again on Tuesday.

However, GBP NZD was able to rebound slightly from these lows by Wednesday morning, trending just below the week’s opening levels due to a drop in ‘Kiwi’ sentiment within the foreign exchange market.

Tuesday’s session saw October’s first global dairy trade auction. Since August, prices of dairy (New Zealand’s most lucrative commodity) had experienced a solid improvement.

However, after an underwhelming increase on the 20th of September, prices of the commodity dropped by 3% yesterday. This weighed heavily on NZD demand, and saw the currency losing out against peers like the Australian Dollar and Canadian Dollar.

Australian Dollar rate struggles

Pound Sterling (GBP) – Sterling experienced another day of sharp losses throughout Tuesday, as Brexit concerns and jitters took control of market movement once more despite yet another better-than-expected PMI report from Markit. Markit’s September UK Construction PMI dressed to impress when it published on Tuesday, finally rising from a three-month-long contraction to score 52.3.

Despite this optimistic score and Monday’s solid Manufacturing PMI, Sterling plunged throughout the day, falling even at the end of the day as investors sold off Sterling short-positions. Concerns that the British government was going to give up on access to the European Union’s single market caused Sterling to hit new 2016 lows against many major rivals.

Sterling’s selloff cooled on Wednesday as investors calmed following Monday and Tuesday’s plummets. Despite this, Sterling continued to trend relatively limply following the publication of Britain’s September Services PMI as the report only came in slightly above expectations – and fell from August’s score from 52.9 to 52.6.

US Dollar (USD) – The Pound to US Dollar exchange rate plummeted on Tuesday, hitting new 31-year-lows and failing to recover from these worst levels due to Brexit concerns continuing to take hold of Sterling trade. The US Dollar was bolstered slightly by increases in Federal Reserve rate hike bets, but the day’s US data was likely not influential enough to bolster the ‘Greenback’ significantly.

Some analysts are taking very dovish outlooks on the GBP USD exchange rate, predicting that the pair could fall as low as 1.25 or 1.20 in the next year. Sterling could mount a strong recovery if the Bank of England (BoE) responds to optimistic UK data with a hawkish attitude in November’s meeting, or if the US Dollar is weakened again on US Presidential election jitters.

Euro (EUR) – The Pound to Euro exchange rate extended its worst post-Referendum levels once again on Tuesday after Monday’s plunge. By Wednesday morning, GBP EUR had fallen almost as low as 1.1300, its lowest levels in over five years, thanks to this week’s Brexit concerns.

Eurozone traders weren’t entirely convinced by the Euro on Tuesday, as the currency trended limply against many of its major rivals. The shared currency was slightly weighed by inflation concerns, as Eurozone producer prices unexpectedly slipped to -0.2% in August.

However, the Euro got a sturdier boost on Wednesday morning as Eurozone Services came in slightly better-than-expected. Germany’s Services PMI report had disappointed in preliminary results, but Markit’s final September print scored a better-than-projected 50.9. This brought the Composite score from 52.7 to 52.8. The overall Eurozone’s Services PMI was improved as a result, from 52.1 to 52.2.

Canadian Dollar (CAD) – The Pound to Canadian Dollar exchange rate continued sliding during Tuesday’s session, hitting its lowest levels since mid-August due to Brexit jitters and solid oil price news, which kept the oil-correlated ‘Loonie’ afloat.

GBP CAD trended limply on Wednesday morning as Sterling’s selloff slowed. Meanwhile, oil prices continued fluctuating, with production continuing to increase in nations like Iran and Libya but lower US oil stocks keeping prices afloat. As a result, the ‘Loonie’ was relatively limp on Wednesday.

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

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