Upbeat RBA Minutes Boost Australian Dollar as Global Trade Tensions Rise

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  • Australian Dollar Benefits as RBA Maintains Optimistic Outlook – Global trade tensions fail to dent ‘Aussie’
  • USD Exchange Rates Trend Lower in Spite of Latest US Trade Tariffs – Confidence in US economy falters
  • Easing UK Inflation Rate to Weigh on Pound – Forecasts point towards fresh dip in September’s consumer price index
  • Dairy Price Contraction Knocks NZD Exchange Rates – New Zealand Dollar pressured by latest sign of dairy industry weakness

RBA Optimism Shores up AUD Exchange Rates

The latest escalation in the US-China trade spat was not enough to drag the Australian Dollar lower on Tuesday, even after both nations imposed fresh tariffs on one another’s goods. As the tariffs proved smaller than markets had feared this limited the negative impact on risk appetite. Confidence in the Australian Dollar was also boosted by the more optimistic nature of the Reserve Bank of Australia’s (RBA) September meeting minutes. While investors remain sceptical of the timescale of the next RBA interest rate hike this still gave AUD exchange rates support.

However, if the Westpac leading index remains muted in August this is likely to diminish the appeal of the Australian Dollar today.

Pound Looks Vulnerable Ahead of UK Inflation Data

Persistent jitters over Brexit and trade kept GBP exchange rates under pressure yesterday, even though markets remain optimistic of the prospect of a November deal. As anticipation mounted ahead of the latest UK consumer price index data figures the upside potential of the Pound also diminished. With the Bank of England (BoE) already looking set to leave interest rates on hold for some time to come the prospect of a weaker inflation rate discouraged investors.

If the headline CPI eases from 2.5% to 2.4% on the year as forecast the mood towards the Pound is unlikely to pick up in the near term.

EUR Exchange Rates Benefit From Market Sentiment

European Central Bank (ECB) President Mario Draghi prompted little volatility on Tuesday as he failed to make any fresh comments on monetary policy in his latest public appearance. Demand for the Euro was instead shored up the day’s bout of US Dollar weakness, benefitting from the negative correlation of the EUR/USD exchange rate. While global trade tensions continued to mount this failed to weigh down the single currency for the time being.

Any easing in Eurozone construction output in July could dampen the appeal of the Euro this evening, with confidence in the outlook of the currency union’s economy still rather fragile.

Escalating Trade Tensions Fail to Support US Dollar

As the Trump administration announced the imposition of a 10% tariff on an additional US$250 billion worth of Chinese products USD exchange rates saw a kneejerk boost. However, this strength ultimately proved short-lived as market risk appetite quickly recovered from the news. Investors had anticipated tariffs of 25%, leaving the US Dollar vulnerable to a bout of selling overnight. With the US economy still likely to see some loss of growth as a result of escalating trade tensions demand for the US Dollar naturally eased.

A contraction in building permits on the month could add to the more bearish mood of USD exchange rates tonight.

Better-Than-Forecast Manufacturing Sales Boost Canadian Dollar

A smaller-than-expected easing in Canadian manufacturing sales growth on the month in July helped to boost CAD exchange rates. The more resilient sales data suggests that the domestic economy remains in a relatively healthy state, even in the face of rising global trade tensions. A rebound in oil prices and resurgent market risk appetite also helped to support demand for the Canadian Dollar, in spite of NAFTA renegotiations continuing to hang over the domestic outlook.

Another decline in US crude oil inventories on the week would offer a fresh boost to CAD exchange rates.

New Zealand Dollar Dented by Dairy Price Contraction

The general uptick in market risk appetite bolstered NZD exchange rates yesterday as investors shook off the latest escalation in US-China trade tensions. However, as the fortnightly Global Dairy Trade auction showed a fresh contraction in prices this knocked some of the wind out of the New Zealand Dollar. This continued the run of dairy weakness that started in June, undermining confidence in the outlook of the New Zealand economy.

As forecasts point towards a deterioration in the third quarter Westpac consumer confidence index NZD exchange rates may remain under pressure today.

Data Released

September 19th 07:00 NZD Westpac Consumer Confidence (3Q) 107
September 19th 10:30 AUD Westpac Leading Index (MoM) (AUG) 
September 19th 18:00 GBP Consumer Price Index (YoY) (AUG) 2.4%
September 19th 19:00 EUR Eurozone Construction Output (YoY) (JUL) 1.7%
September 19th 22:30 USD Building Permits (MoM) (AUG) -0.1%

Post by TorFX

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