Australian Dollar reaches new high
13 September 2016 by News DeskAustralian Dollar was impacted by falling Fed rate hike bets on Monday evening and Tuesday.
Australian Dollar losses were softened by lower demand for the risk-correlated Australian Dollar, according to currency specialists TorFX
The market’s overall low appetite for risk-correlated currencies meant that GBP/AUD’s uptrend continued even on Tuesday.
This was despite generally optimistic Australian data, with NAB’s business confidence report for August improving from 4 to 6.
Falling prices of many key commodities, such as Australia’s iron ore commodity and others like oil, also weighed down risk-appeal.
New Zealand Dollar (NZD) – The Pound to New Zealand Dollar exchange rate’s movement was similar to GBP/AUD’s on Monday and Tuesday morning, but the ‘Kiwi’ Dollar did a slightly better job at muting its losses due to recent solid New Zealand data.
However, due to a relatively quiet economic calendar the New Zealand Dollar is finding it harder to remain supported, and low appetite for risk-correlated currencies has undermined the ‘Kiwi’ considerably, with GBP/NZD now fluctuating near weekly highs.
Australian Dollar reaches new high
Pound Sterling (GBP) – Despite a slow start on Monday morning, the Pound was able to sustain gains against most of its major rivals by the end of the day as investors adjusted on Sterling ahead of Tuesday’s key Consumer Price Index (CPI) report.
Analysts predicted that inflation would have jumped from 0.6% to 0.7% this month – but such an improvement would be attributed to the low value of the Pound rather than any economic improvement.
The Bank of England has wanted inflation near 2.0% for years now, but the rise in inflation since the June Brexit vote has been due to a drop in GBP value causing import prices to rise – eventually translating into higher consumer prices.
Following the publication of the report, Sterling weakened from Tuesday’s best levels as consumer prices did not spike as speculated. Instead, monthly inflation came in at 0.3% and yearly inflation remained at 0.6%.
US Dollar (USD) – Bets of a Federal Reserve interest rate hike dropped again during Monday’s American session, with analysts now perceiving little chance of a September rate hike despite all the speculation in recent weeks.
Following hawkish comments made by multiple Fed officials last week, new comments issued on Monday took an opposing view, claiming that there was no rush to raise interest rates. The latest comments came from Federal Open Market Committee member Lael Brainard, a typically dovish member, and Minneapolis Fed President Neel Kashkari. Both officials argued that there was little urgency in acting and hoped for more upbeat data.
As a result, GBP/USD soared on Monday evening as the US Dollar weakened once more. However, the pair slipped on Tuesday as Britain’s August inflation scores slightly disappointed investors.
Euro (EUR) – The Pound to Euro exchange rate edged higher once more on Monday while global markets were hit by some of their biggest losses since the Brexit vote back in June.
This market selloff appears to have been due to concerns that central banks are drawing closer to normalising monetary policy, inspired by 2016 Fed rate hike bets and the European Central Bank’s (ECB) decision to leave policy unchanged at its latest meeting.
In the short term, GBP is being kept afloat against rivals like EUR due to the undervalued Sterling being a purchase opportunity for foreign investors. Sterling-denominated corporate debt and higher yield levels than those in Europe have driven investment due to the weak Pound, also making the Pound stronger at times despite a lack of supportive data.
The Euro was weakened slightly on Tuesday morning as Germany’s underwhelming preliminary Consumer Price Index (CPI) scores turned out to be accurate. As such, German inflation stagnated month-on-month while the yearly score came in at a lower-than-hoped 0.4%.
Canadian Dollar (CAD) – The Pound to Canadian Dollar exchange rate advanced by around a cent on Monday, hitting a 10-day-high as market demand for the Canadian Dollar plunged further amid weak risk-sentiment and low oil prices.
The day’s selloff in financial markets also weakened the Canadian Dollar due to its oil-correlation, with markets becoming increasingly uncertain on the future of the commodity. In recent oil news, some OPEC rivals have seemingly increased oil output in order to resist oil production freeze rumours, meaning the oil supply glut looks set to continue for a while longer. As a result, the ‘Loonie’ remained weak on Tuesday.
Disclaimer: This update is provided by TorFX, a leading foreign exchange broker, its content is authorised for reuse by affiliates.
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