Australian Dollar slips against Sterling
29 July 2016 by News DeskAustralian Dollar enjoyed a brief risk-correlated rally on Thursday as investors fled from the US Dollar following the Fed’s decision to leave the US interest rate frozen.
Australian Dollar remains pressured and it slipped again on Friday as the Reserve Bank of Australia’s August policy meeting is held next Tuesday, according to currency specialists TorFX
The RBA is widely thought to be planning a cut in its interest rate in August. The Australian Dollar was likely not helped by news that Australia’s private sector credit score worsened in June.
New Zealand Dollar (NZD) – The Pound to New Zealand Dollar exchange rate lost around a cent and a half on Thursday, as a weak Sterling was easily capitalised on by a recovering ‘Kiwi’.
Recently hitting lows across the board on high Reserve Bank of New Zealand (RBNZ) rate cut bets, investors bought back into the ‘Kiwi’ from its lows. However, the currency remains pressured with the RBNZ’s next policy meeting set for the 11th of August and a rate cut widely expected.
Australian Dollar slips against Sterling
While the Australian Dollar remains pressured the ‘Loonie’ has benefitted.
Canadian Dollar (CAD) – The weak Canadian Dollar was able to advance against Sterling on Thursday as the Pound plummeted across the board. While GBP/CAD gave up around a cent of its recent gains, the ‘Loonie’ remained unappealing to many investors amid news that price of oil, Canada’s most lucrative commodity, had plunged to a new three month low.
Friday’s Canadian Gross Domestic Product (GDP) scores have the potential to boost the ‘Loonie’ if they beat expectations. These scores will be from May, the month of the Alberta wildfire disaster.
As a result, Canadian growth is expected to have fallen from 0.1% to -0.5% in May. If the Canadian economy weathered the disaster better than markets expect, the Canadian Dollar could rally. However, the ‘Loonie’ is likely to slump if the figure prints as expected or lower.
Australian Dollar slips against Sterling
Pound Sterling (GBP) – The Pound dropped considerably on Thursday as investors continued to react bearishly towards news that the British economy had been struggling since the nation’s vote to ‘Leave’ the European Union in June.
A Bank of England policymaker, David Blanchflower, hinted on Thursday that it was possible for the central bank to cut the key UK interest rate into negative territory, causing many major banks to begin warning their customers that they may have to charge for deposits. Friday morning data also revealed that UK consumer confidence was slipping at its fastest pace in 26 years.
The general consensus about next week’s BoE meeting is that the bank is likely to cut the UK interest rate to a record low of 0.25% – a cut of 25 basis points. If negative rates are possible it’s more likely to be reached gradually. However, markets have been wrong regarding the BoE before, meaning a cut of over 50 basis points is indeed possible in August.
US Dollar (USD) – News that the Federal Reserve was leaving the key US interest rate on hold in Wednesday’s American session weighed heavily on the US Dollar throughout Thursday.
Despite this, the lack of appeal in the Pound saw the ‘Cable’ exchange rate dropping by over half a cent. Investors readjusted their positions on the US Dollar throughout the day but it weakened further in Friday’s Asian session.
The Bank of Japan (BoJ) introduced a stimulus policy during its meeting on Friday, citing the Brexit as their main downside risk. However, as the stimulus package was smaller than investors expected, the Yen surged higher, pulling considerable value from the Dollar.
The US Dollar could easily recover regardless if Friday’s US growth data for Q2 beats expectations. With Sterling weighed by BoE expectations and the ‘safe-haven’ US economy in decent health, the US Dollar is in a good position.
Euro (EUR) – The Euro was boosted against most of its major rivals during Thursday’s session, causing the Pound to Euro exchange rate to drop by almost a cent.
Various factors weighed on the Pound, such as comments from BoE officials and the news that Lloyds was planning to cut 3,000 jobs, a move that many believe has been influenced by the Brexit.
Eurozone data was also solid, helping the Euro advance. Germany’s unemployment rate remained at 6.1% as expected, but the number of unemployed people fell by 7k, further than expected.
It was German inflation figures that boosted the Euro most yesterday, improving from 0.1% to 0.3% despite only being expected to edge up to 0.2%. Yearly CPI also beat expectations, printing at 0.4%. These July figures boosted hopes that the Eurozone had remained sturdy since the Brexit vote.
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