Australian Dollar Under Pressure in Anticipation of RBA

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Headlines

  • AUD Exchange Rates Failed to Benefit from Inflation Data – Australian Dollar muted ahead of RBA announcement
  • Rising Odds of No Deal Brexit Weighed Down Pound – Investors spooked by threat of UK crashing out of EU
  • Euro Shrugged Off Surprise Contraction in German Factory Orders – Weak trade data could dent single currency today
  • New Zealand Commodity Price Index Slumped Sharply – New Zealand Dollar muted as concerns remain over economic outlook



Australian Dollar

A steady showing from July’s TD Securities inflation reading offered the Australian Dollar little in the way of support at the start of the week. Investors failed to take encouragement even as the monthly inflationary measure showed a modest improvement of 0.1%. With global trade tensions still heightened the mood towards the antipodean currency remained muted, especially as markets began to brace for the latest Reserve Bank of Australia (RBA) policy decision.

If RBA policymakers appear to take a more optimistic outlook today this could offer AUD exchange rates a rallying point, though.

Sterling

GBP exchange rates came under renewed pressure on Monday thanks to comments from international trade secretary Liam Fox, who noted that the odds of a no deal Brexit currently stand at 60-40. This assessment naturally spooked investors, prompting the Pound to slide lower across the board as worries over the outlook of the UK economy mounted. While new car sales saw a modest recovery in July this was not enough to outweigh these latest political jitters.

An improvement in the Halifax house price index may help to put a floor under Sterling today.

Euro

The single currency benefitted from a stronger-than-expected Eurozone Sentix investor confidence index, which picked up from 12.1 to 14.7 in August. While worries remain over the Eurozone economy’s ability to recover its lost momentum in the second half of the year this improvement gave the Euro a boost. However, these gains were tempered by a surprise contraction in German factory orders in June.

Demand for the Euro could weaken today if June’s German trade data falls short of forecast, particularly if export volumes show a contraction on the month.

US Dollar

Even in the absence of any fresh domestic data the US Dollar pushed higher overnight, benefitting from the general sense of market risk aversion. With the Trump administration looking set to continue its protectionist trade policies for the foreseeable future investors were encouraged to favour the US Dollar over its risk-sensitive rivals. Unless markets see signs of tariffs negatively impacting the US economy the downside potential of the US Dollar looks limited.

A decrease in June’s JOLTS job openings figure may give USD exchange rates further support, providing the US labour market continues to show signs of tightening.

Canadian Dollar

The Canadian Dollar lacked any particular traction yesterday, in spite of oil prices strengthening once again. While markets remain hopeful over the prospect of NAFTA talks wrapping up in the near future the increasing protectionism of the US remains a concern for the Canadian economy. Until the revised trade agreement is formally in place CAD exchange rates remain vulnerable to downside pressure.

As forecasts point towards a solid uptick in the Ivey PMI for July, however, CAD exchange rates could see some gains tonight.

New Zealand Dollar

Another sharp contraction in the ANZ commodity price index failed to particularly weigh on the New Zealand Dollar on Monday. Investors shrugged off the -3.2% drop in the price index, even though this highlights the continued underlying weakness of the New Zealand economy. Even so, the mood towards the ‘Kiwi’ remained muted as anticipation mounts for the Reserve Bank of New Zealand’s (RBNZ) latest policy decision.

Speculation ahead of tomorrow’s RBNZ announcement looks set to keep the New Zealand Dollar under pressure.


Data Released


August 7th 08:30 AUD Construction PMI (JUL) 
August 7th 14:30 AUD Reserve Bank of Australia Rate Decision 1.50%
August 7th 16:00 EUR German Trade Balance (JUN) 20.8 billion
August 7th 17:30 GBP Halifax House Price Index (3M/Y) (JUL) 2.6%
August 8th 00:00 USD JOLTS Job Openings (JUN) 6.625 million
August 8th 00:00 CAD Ivey PMI (JUL) 64.2

Post by TorFX

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