Geopolitical Concerns cause European Losses Amid RBA Stability

Australian Dollar (AUD)

The Australian dollar rose against currencies such as the pound (AUD/GBP) and euro (AUD/EUR) after the RBA’s latest minutes suggested that the central bank would be holding interest rates steady for the foreseeable future – remaining at a record low of 1.5%. The minutes read: ‘In considering the stance of monetary policy, members discussed the policy decisions made throughout the easing phase since late 2011, during which the cash rate had been lowered in aggregate by 3¼ percentage points. The lower rates had helped support the economy in the transition following the mining investment boom and, more recently, had been in response to lower-than-expected inflation.’

However, the Aussie dollar has been trending lower against the US Dollar since the US presidential election and has been hovering near six month lows in the past few sessions. With no high profile economic domestic data due out for Australia in the rest of the week, the AUD exchange rate is likely to respond to geopolitical factors and commodity values as we approach the Christmas weekend.

New Zealand Dollar (NZD)

The Australian dollar was able to register gains against close counterpart the New Zealand dollar (AUD/NZD) after the latest Global Dairy Trade (GDT) prices fell 0.5% at auction in what’s been earmarked as the first decline since October. Looking ahead, the Kiwi dollar might experience some movement on New Zealand trade balance and credit card spending data scheduled for Wednesday’s Oceanic session.

British Pound (GBP)

Ongoing Brexit concerns caused the pound sterling to US dollar (GBP/USD) exchange rate to slip below 1.2400 at the start of the week – its lowest level in a month. The Aussie was also able to climb against sterling (AUD/GBP) as investors looked towards political events in the UK. UK Prime Minister Theresa May commented during her debut at the Commons Liaison Committee that the UK could continue to pay into the EU budget if it remained good value for money – a statement that may offer some small reassurance to economic markets.

Euro (EUR)

A question on many investor’s minds at the moment is regarding whether the euro will reach US dollar parity in the near future. The single currency has dropped to it’s lowest level against the buck since 2003 at 1.0355 after geopolitical tensions in Europe heightened. Berlin was subject to a potential terrorist attack, and Russia’s ambassador to Turkey was assassinated in Ankara and events such as these tend to see investors seeking safe-haven assets. Meanwhile, Eurozone economic data was thin on the ground during Tuesday’s European trading, but investors may see the single currency fluctuate on Wednesday with the release of the Eurozone’s flash December consumer confidence report. However, any further heightening of geopolitical tensions is likely to influence the euro significantly and leave economic data on the backburner.

US Dollar (USD)

The US dollar has remained strong in the market against other majors on the back of upbeat comments from Federal Reserve chairwoman Janet Yellen. The Fed chief commented on the labour market and suggested that wage growth is picking up as the US economy produces the strongest labour market in almost a decade. Investors will be looking forward to Wednesday’s US home sales and crude oil inventory data which could cause some moderate movement to the USD exchange rate.

Canadian Dollar (CAD)

The Australian dollar spent its second day declining versus the Canadian dollar (AUD/CAD) in Tuesday’s trading after Canadian wholesale sales rose above the forecast 0.6% in October at 1.1% month-on-month. However, Thursday’s North American session is likely to cause some loonie volatility with the release of Canadian retail sales stats and consumer price index (CPI). The loonie won’t get much respite towards the end of the week with Friday bringing with it the release of Canadian gross domestic product (GPD) numbers. Year-on-year, economists have forecast a slight dip in growth from 1.9% to 1.8% which may contribute towards Canadian dollar losses.

Disclaimer: This economic update is provided by FC Exchange a Global Reach Group Company, industry leaders in foreign exchange. Authorised affiliates are permitted to reuse content.

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