Australian Dollar remains pressured
01 August 2016 by News Desk
Australian Dollar (AUD) – The Pound to Australian Dollar exchange rate lost over a cent in value on Friday as bets of a Bank of England interest rate cut continued to push the Pound lower, according to currency specialists TorFX
Meanwhile, the risk-correlated Australian Dollar gained in response to a plummet in the appeal of the US Dollar. Investors flooded to riskier investments following a Fed rate freeze and lower-than-expected US growth figures.
However, with the Reserve Bank of Australia’s August policy meeting taking place during Tuesday’s Asian session, the ‘Aussie’ will be pressured throughout Monday as markets readjust their positions.
Bets are currently mixed on whether or not the RBA will cut the key Australian interest rate. Q2 inflation figures released last week were too mixed to give investors a solid idea of whether or not the RBA will act, and the ‘Aussie’ remains highly overvalued.
If the RBA cuts rates on Tuesday, AUD will plummet across the board with the Pound potentially advancing against it ahead of Thursday’s BoE meeting.
Australian Dollar remains pressured
New Zealand Dollar (NZD) – The Pound to New Zealand Dollar exchange rate lost over two cents on Friday as investors flooded into risky assets following underwhelming US ecostats.
Both GBP and NZD are likely to remain pressured over the coming week. The Bank of England’s ‘Super Thursday’ meeting could send Sterling plummeting, but its losses may be muted towards the end of the week by bets that the Reserve Bank of New Zealand will cut New Zealand’s interest rate in its policy meeting next week.
Pound Sterling (GBP) – The Pound continued to slip throughout Friday, ending the week lower against most of its major rivals (save the US Dollar). Poor US data boosted Sterling slightly as it weighed on Fed rate hike bets and led to investors seeking out riskier investments.
While Friday had little influential UK data, the revelation that UK consumer confidence had fallen at its fastest rate since 1990 as a result of June’s Brexit vote undermined any Sterling attempts to recover. The figures also piled on top of a series of other figures from the last few weeks that are all adding to bets that the Bank of England (BoE) will cut key UK rates in this week’s ‘Super Thursday’ announcement.
Sterling will likely plummet if the BoE cuts rates to 0.25% as expected. However, a bigger than expected stimulus package will send GBP plunging even lower.
US Dollar (USD) – The Pound to US Dollar exchange rate advanced by almost a cent on Friday. Despite Sterling’s weakness in other exchange rates, surprisingly underwhelming US growth figures weighed heavily on the previously sturdy US Dollar.
While the ‘Greenback’ experienced a bearish run following the Federal Reserve’s decision to leave US rates on hold, Friday’s GDP figures damaged expectations that the US economy was becoming increasingly healthy.
Markets had been expecting Q2 GDP to put the US economy on track for a 2.6% yearly expansion, but the score printed at a lower-than-expected 1.2%.
Quarterly growth from April to June came in at an underwhelming 0.3%. Investors had previously hoped that an ongoing slew of optimistic US data would make it increasingly difficult for the Federal Reserve to continue its current ‘wait and see’ approach to monetary policy. However, as a result of the Q2 GDP figure, bets of a September rate hike have fallen.
Australian Dollar remains pressured
Euro (EUR) – Last week the Euro completed its first solid week of gains since the Brexit vote, as new data continued to suggest that (aside from a few small hits) it was business as usual for the Eurozone economy.
Investors expected inflation in the Eurozone to remain at a low 0.1% or slide. However, inflation improved to 0.2%. While this figure is still unhealthy, it boosted confidence that the Eurozone’s economy was proving resilient to global forces – with its major issues all internal.
The Pound to Euro exchange rate hit a two week low on Friday, losing over half a cent. While the Euro’s appeal has been limited in the month since the Brexit vote, that could all change now as the Brexit factors dragging the Pound down don’t seem to be as huge a downside risk for the Eurozone as some had previously suggested. The Euro held its ground on Monday amid news that Eurozone’s banks had passed a stress test, though any gains were minimal.
Canadian Dollar (CAD) – The Canadian Dollar experienced its first uptrend in a while on Friday, boosted by a surge in risk appetite following poor growth data from the US. As Fed rate hike bets dropped, investors looked towards riskier currencies like the ‘Loonie’ in order to make their profits.
This was despite worryingly low Canadian growth data for May published on the same day. May was the month in which Canada suffered from the Alberta wildfire disaster, which harmed not just oil fields and oil production, but considerable portions of the town of Fort McMurray, including homes and businesses.
Canadian GDP for May was expected to be as low as -0.5% as a result, but the figure came in worse-than-expected at 0.6%. This slowed annual growth from 1.5% to 1.0% – and is likely to weigh the ‘Loonie’ down in the coming week.
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