Australian Dollar surge after RBA Decision
06 September 2016 by News DeskAustralian Dollar strengthened as risk-correlated currencies became more appealing in the global market.
The Australian Dollar surged during Tuesday’s Asian session as the Reserve Bank of Australia opted to leave interest rates on hold, according to currency specialists TorFX
With the RBA meeting past, investors poured into the risky Australian Dollar as risk-correlated high-yielding assets began to look more appealing on poor Eurozone and US data last week.
New Zealand Dollar (NZD) – The New Zealand Dollar was generally able to hold its ground against Sterling on Monday as risk-correlated currencies became more appealing due to strong trade data for oil and other major commodities.
An unexpected boost in Chinese Services PMI also bolstered appeal for the ‘Kiwi’ and the ‘Aussie’.
GBP/NZD plunged on Tuesday as Asian markets reacted favourably to the Reserve Bank of Australia’s (RBA) interest rate freeze.
The ‘Kiwi’ was also strengthened by hopes that dairy, New Zealand’s most lucrative commodity, would increase in price again during Tuesday’s Global Dairy Trade auction.
Australian Dollar Stronger after RBA Decision
Pound Sterling (GBP) – The Pound once again advanced on Monday as Markit’s August Services and Composite PMI scores came in well above expectations. This completed a hat trick of surprisingly optimistic PMI reports, sending Sterling surging on Monday morning.
As Manufacturing and Services both came in above 50 despite being projected to score below 50, this brought the overall Composite PMI for August up from an expected 50.8 to 53.6 – from July’s 47.5. This boosted hopes that the Bank of England (BoE) would not expand its monetary stimulus measures yet. However, despite hitting highs against many major rivals, Sterling struggled to hold its best levels on news that August’s scores have more or less left Q3 growth near stagnation.
US Dollar (USD) – The Pound to US Dollar exchange rate briefly hit levels not seen since late-June on Monday morning as Sterling surged on a surprisingly strong Services PMI report for August. As Services are Britain’s largest work sector, accounting for over 70% of the UK’s Gross Domestic Product (GDP), this news left Sterling in a strong position.
The US Dollar was limp during Monday trade as US markets were closed to observe the Labour Day holiday. As a result of the break no US datasets were published, but Tuesday’s American session includes the publication of highly anticipated Non-Manufacturing Composite PMIs from ISM. If the score prints well below forecasts of 55, the US Dollar will likely continue to struggle this week. However, any score near 55 may not have a strong impact on US Dollar exchange rates.
Euro (EUR) – The Pound to Euro exchange rate hit a monthly high on Monday thanks to a better-than-expected UK Services score for August.
The Euro, on the other hand, was weakened by news that Eurozone activity had grown at a slower-than-expected pace, failing to meet preliminary scores. Eurozone Services came in at 52.8 and the Composite PMI at 52.9. These low scores were largely influenced by a sharp fall in German Services activity, from 53.3 to 51.7. As the Eurozone’s largest economy, this 15-month low score from Germany was seen as concerning to markets.
While the day’s other data (investor confidence in September and retail sales in July) beat expectations, this was unable to support the Euro yesterday, allowing Sterling to advance.
The Euro was bolstered slightly on Tuesday morning by news that Germany’s August Retail PMIs had improved from 52 to 54.1 – bringing Eurozone Retail sales up to 51 from 48.9. The Eurozone’s final Q2 GDP scores came in as expected, at 1.6% year-on-year and 0.3% QoQ.
Canadian Dollar (CAD) – The Pound to Canadian Dollar exchange rate slipped on Monday due to a surge in appeal for the oil-correlated Canadian Dollar on Monday’s session. While Canadian markets were closed to observe Labour Day, the Canadian Dollar still managed to benefit from global oil news, making the ‘Loonie’ the day’s most highly demanded major currency.
Oil prices soared after it was announced that Russia and Saudi Arabia had come to an agreement on supporting a boost in oil prices. Oversupply of the commodity as well as high production over the last few years has left oil prices dwindling, however this agreement between two major oil-producing nations to consider production freezes and other price-boosting options was largely promising for investors.
As a result, GBP/CAD dropped by over half a cent and trended flatly on Tuesday morning.
Disclaimer: This update is provided by TorFX, a leading foreign exchange broker, its content is authorised for reuse by affiliates.
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