Australian Dollar Weak as RBA Policy Announcement Approaches

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  • ‘Aussie’ slumps ahead of RBA meeting – US protectionist policies also weighing on AUD
  • AUD/GBP drop furthered by UK services PMI – Index for UK’s key sector climbs above-forecast
  • AUD/EUR slides despite Italian election results – Eurosceptic and far-right parties left to negotiate coalition agreement
  • USD rises on stronger-than-expected ISM non-composite index – CAD tumbles as Trump rails against NAFTA on Twitter

Australian Dollar

The approach of today’s monetary policy announcements from the Reserve Bank of Australia (RBA) kept the Australian Dollar on weak form yesterday. Markets were also still avoiding high-risk assets after last week’s announcements from the US that it would impose tariffs of 25% on steel imports. Australia accounted for over half the world’s exports of iron ore – a key steelmaking ingredient – in 2016, so this shift towards protectionist policies could have a profound impact upon the Australian economy.

The RBA will announce its latest decisions early this afternoon.


The AUD/GBP exchange rate slumped yesterday, with Sterling boosted across the board by a better-than-expected services PMI result for February. The index was expected to climb from 53 to 53.3, but instead climbed to a four-month high of 54.5; a level matched by the composite index.

BRC retail sales data is the only release on the UK calendar today.


Despite some disappointing Eurozone data, the Australian Dollar to Euro exchange rate still slumped yesterday. The finalised Italian, French and Eurozone services and composite indices were all revised lower on their previous estimates, while the Sentix investor confidence index for March fell much-further-than-expected from 31.9 to 24. Even lingering political concerns following Italy’s weekend general election, which left a hung parliament dominated by Eurosceptic and far-right parties, failed to prevent AUD from dropping.

A slew of Eurozone retail PMIs are set for release today, as well as the German construction index.

US Dollar

The US Dollar was supported by the release of the latest ISM non-manufacturing index. The measure had been expected to slip to a still-impressive 59 points, but instead only dipped to 59.5, suggesting that the US economy remains on solid form. This helped keep interest rate hike bets for this month’s policy meeting elevated.

The only development on the US data calendar today is a speech from Federal Reserve official William Dudley.

Canadian Dollar

The Canadian Dollar slumped yesterday after US President Donald Trump tweeted his dissatisfaction with the North American Free Trade Agreement (NAFTA) between the US, Canada and Mexico. Last week the White House announced tariffs on steel and aluminium exports, but Trump yesterday tweeted that these would not be implemented if Canada agreed to a ‘new & fair’ NAFTA agreement, which would likely mean terms that significantly disadvantage Canada over the US compared to the current deal.

New Zealand Dollar

The New Zealand Dollar was on mixed form yesterday, but managed to record minor gains versus the Australian Dollar. A lack of risk-appetite was weighing on both currencies, but AUD was weaker thanks to the approach of the RBA meeting, leaving NZD marginally more appealing.

The results of today’s Global Dairy Trade auction could boost the New Zealand Dollar if the average winning price of dairy products has risen.

Data Released

6th March 10.01 GBP BRC Sales Like-For-Like (YoY) (FEB) 0.5%
6th March 13.30 AUD RBA Cash Rate Target (MAR 6) 1.5%
6th March 19.10 EUR Markit Eurozone Retail PMI (FEB)
6th March 22.30 USD Fed's Dudley Speaks at US Virgin Islands
6th March NZD Global Dairy Trade Auction

Post by TorFX

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