Australian Dollar update 20 July
20 July 2016 by News DeskAustralian Dollar watchers now await the Reserve Bank of Australia’s expected August rate cut.
Australian Dollar update – the RBA’s July meeting indicated that while the bank was not in a hurry to cut the key Australian interest rate, it would leave the door open for an August rate cut depending on growth figures and the value of the Australian Dollar, according to currency specialists TorFX
The Australian Dollar has recently been among the most overvalued currencies on the forex market, which has proven difficult for Australia’s trade.
As a result of the minutes report, RBA rate cut bets soared and the Australian Dollar plunged throughout the day.
New Zealand Dollar (NZD) – The Pound to New Zealand Dollar exchange rate plummeted by around two cents on Tuesday as investors sold the Pound on profit-taking and bought the ‘Kiwi’ for the same reason.
The New Zealand Dollar plummeted across the board last week after the Reserve Bank of New Zealand (RBNZ) announced that it would release a sudden economic assessment update sometime this week. The announcement caused RBNZ rate cut bets to soar, while NZD hit new lows. On Tuesday, investors bought the ‘Kiwi’ from its cheapest levels, ahead of the RBNZ update which is expected on Thursday morning.
Foreign Currency Update 20 July
Pound Sterling (GBP) – Sterling lost value against most major currencies during Tuesday’s session, as investors indulged in a bout of profit-taking from the currency’s recent highs. After rallying for much of last week and continuing to gain on Monday, Sterling’s uptrend came to a halt despite Tuesday’s optimistic UK inflation news.
Britain’s anticipated June inflation scores beat expectations, with the monthly figure remaining held at 0.2% and the yearly score improving from 0.3% to 0.5% despite projections of a 0.4% figure. The solid inflation figure was put down to high demand for flights to France amid the Euro 2016 football championships.
High demand led to an increase in air fare prices, but this did little to stoke market flames. An increase in inflation would typically indicate that the Bank of England would be closer to raising the key interest rate.
However, an increase in UK consumer prices has been expected since the Brexit vote, and the BoE has already indicated that easing policies would be introduced. This left investors uninspired as they continued their profit-taking selloff.
US Dollar (USD) – The Pound to US Dollar exchange rate lost over a cent yesterday as a weak Pound and an increase in risk-off movement allowed the ‘safe-haven’ US Dollar to easily capitalise.
Markets were left selling the Pound from its highs throughout the day, undeterred by solid inflation scores and encouraged by the International Monetary Fund’s downgraded UK growth forecast.
Poor news from nations with commodity-correlated currencies as well as underwhelming prices of commodities themselves led investors to move away from risky commodity currencies towards safer assets. However, the US Dollar was also slightly boosted by June’s far higher-than-expected housing starts report. Housing starts improved from -1.7% to 4.8% month-on-month.
Foreign Currency Update 20 July
Euro (EUR) – The Pound to Euro exchange rate dropped by around half a cent on Tuesday as investors took the Pound down from its recent solid levels. The pair trended flatly in the region of 1.19 on Wednesday with a lack of UK news to drive currency trade.
Last week was the Pound’s best performance since 2009 against many currencies, including the Euro. However, investors seemed unwilling to take the currency higher on Tuesday as demand increased for ‘safe-haven’ currencies. This allowed the Euro to gain in cross-flows.
The Euro was sturdy during Tuesday trade despite a grim Eurozone economic sentiment survey from ZEW. The German organisation’s German current situation score dropped from 54.5 to 49.8 in July, while Germany’s economic sentiment score fell from 19.2 to -6.8. The Eurozone’s economic sentiment score plummeted from 20.2 to -14.7.
Canadian Dollar (CAD) – The Pound lost around half a cent against the Canadian Dollar during Tuesday’s session as a Sterling selloff clashed with a weak ‘Loonie’.
Prices of oil, Canada’s most lucrative commodity, continued to struggle close to levels of US$45 per barrel. Oil prices have been weak since the UK voted to Brexit, sending jitters throughout the market, and have been worsened by a continuing oil glut.
However, the Canadian Dollar may benefit in coming days as investors look towards less traditional havens. Traders bought C$14.7 bn in Canadian securities throughout May in an attempt to store their assets, and some suggest that this trend could continue – benefiting the Canadian Dollar.
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