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Australian Dollar weighed down by risk

30 November 2016 by News Desk

Australian Dollar demand was also hampered by a drop in the price of iron ore, Australia’s most lucrative commodity.

Australian DollarAustralian Dollar was weighed down by ore prices after reaching above US$80 a tonne earlier in the week, prices of the commodity plunged as a result of profit-taking, according to currency specialists TorFX

GBP AUD struggled to hold its best levels however. Wednesday’s Australian private sector credit results fell less than expected, from 5.4% to 5.3%, which may have supported the Australian Dollar slightly.

New Zealand Dollar (NZD) – The Pound to New Zealand Dollar exchange rate continued falling despite a slip in risk-sentiment.

While OPEC oil output cap hopes faded, the risky New Zealand Dollar was able to benefit over its commodity-bloc peers due to an optimistic financial stability report from the Reserve Bank of New Zealand (RBNZ).

In its latest report, the RBNZ indicated that, for now at least, its interest rate cutting bias was over.

While the RBNZ has cut rates multiple times this year, New Zealand’s overnight rate still remains one of the highest in the developed economy, which could make the ‘Kiwi’ Dollar one of the more sought-after risky currencies in the coming months.

Australian Dollar weighed down by risk

Pound Sterling (GBP) – Sterling rose slightly against most of its major rivals on Tuesday. After being sold due to Brexit jitters at the beginning of the week, the currency staged something of a rebound thanks to a solid duo of British ecostats yesterday.

October’s net consumer credit results were expected to rise from 1.4b to 1.5b, but surpassed this to score 1.62b. October mortgage approvals also impressed, beating expectations of 65k to hit 67.52k.

While these impressed, the main cause for Pound demand was a drop in GBP short positions as traders cut their bets against the currency. Bets against Sterling fell to their lowest levels since September.

Sterling failed to hold its best levels on Wednesday morning as GfK’s November UK consumer confidence report disappointed, plunging from -3 to -8.

US Dollar (USD) – The Pound to US Dollar exchange rate surged back to the week’s opening levels on Tuesday and was largely able to hold its ground thanks to investors cutting their GBP short positions.

While the latest US data was highly impressive, indicating that the US economy grew at 3.2% in Q3 rather than the initially expected 2.9%, the US Dollar struggled to benefit.

USD gave up value to rivals on Tuesday despite US Federal Reserve bets hitting 99%, but this means the US Dollar has strong underlying factors that will give it significant support in the coming weeks.

Euro (EUR) – The Pound to Euro exchange rate advanced slightly on Tuesday before falling back again slightly on Wednesday morning.

The level of 1.18 appears to be a formidable level of resistance for GBP EUR but the pair has generally performed well over the last week due to a stronger Pound and a weak Euro. Even with solid Eurozone data, the shared currency has struggled. Wednesday’s German unemployment results for November met expectations and had little impact.

Traders continue to be wary of the Euro this week as many expect the European Central Bank (ECB) will extend its monetary stimulus measures in next week’s policy meeting. Fears of rising populism within the Eurozone bloc are also limiting Euro strength, particularly ahead of this weekend’s political events in Italy and Austria.

Canadian Dollar (CAD) – The Pound to Canadian Dollar exchange rate recovered over half of its recent losses on Tuesday as traders reacted with disappointment to the latest OPEC developments.

OPEC is still due to meet on Wednesday which could keep the oil-correlated ‘Loonie’ Dollar steady, but with non-OPEC nations such as Russia and Iran declining to be part of any proposed oil output cut traders may be heavily disappointed by the outcome.

Disclaimer: This update is provided by TorFX, a leading foreign exchange broker, its content is authorised for reuse by affiliates.

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