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Australian Dollar slumps

10 December 2016 by News Desk

Australian Dollar was hit by disappointing figures relating to the Aussie economy.

Australian DollarAustralian Dollar: Chinese data may have suggested stronger demand for Australian goods, but the latest trade figures did not paint an uplifting picture of the domestic economy, according to currency specialists TorFX

The trade deficit was expected to more-than halve in the latest report, but instead swelled from -AU$1227 million to -AU$1541 million.

This weakened the outlook of the Australian economy and raised the odds that the Reserve Bank of Australia would have to cut interest rates again in the future.

Overall this caused the Australian Dollar to slump.

New Zealand Dollar (NZD) – The New Zealand Dollar lacked any real momentum of its own yesterday, even though Chinese trade data showed a shock 13% rise in imports.

This bodes well for New Zealand businesses, many of whom export to the Asian superpower.

Where other currencies weakened, the New Zealand Dollar advanced, but the day’s ECB developments had caused investors to rush to the now even more attractive US Dollar.

Australian Dollar slumps

Pound Sterling (GBP) – The Pound was on mixed form yesterday, boosted by an encouraging rise in the number of surveyors expecting house prices to rise in the coming months.

The property market was hit hard by the Brexit vote, so Sterling demand was buoyed by signs of a steady recovery. Elsewhere, the latest developments surrounding Article 50 kept investors on an uncertain footing.

Theresa May won support in a non-binding Parliamentary vote for her timeline for Brexit; something she had demanded in exchange for agreeing to reveal her negotiating plans to MPs. Investors are hoping to get a better look at the government’s strategy in the coming weeks.

Euro (EUR) – Yesterday was a game of two halves for the Euro. The European Central Bank (ECB) extended quantitative easing until the end of 2017 as expected, although it cut the rate of asset purchases down to €60 billion per month from April next year.

However, the resulting Euro rally quickly turned into a slump after ECB President Mario Draghi commented that QE could be extended further and that inflation was forecast to remain too far below target to justify monetary tightening until at least the end of 2019.

US Dollar (USD) – The weakening Euro sent the US Dollar on a bull charge yesterday, causing many analysts to predict the currency pairing could even reach parity by the end of the year.

As EUR/USD and USD/EUR are the most commonly traded currency pairs, a weakening of the Euro is going to improve the purchasing power of the US Dollar. The US Dollar will also see increased demand as investors borrow Euros at the Eurozone’s low interest rates and convert them into ‘Greenback’ in order to buy higher-yielding US assets.

Canadian Dollar (CAD) – A positive outlook for Canada’s leading oil-producing region helped boost the Canadian Dollar yesterday.

The ‘Loonie’ was on bullish form after the Conference Board of Canada predicted the next year would see Alberta, which is currently struggling with one of the worst recessions in recent history, return to economic growth. Additionally, domestic data improved, with building permits registering a particularly impressive performance; a jump of 8.7%.

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