The Aussie dollar has been making positive movements against most currencies over the past week, which could well continue if recent market factors remain unchallenged.
In Europe there has been a lot of Central Bank rhetoric that the Euro is overpriced and inflation levels are also very low. The ECB President, Mario Draghi, has stated that he will act and all but put a time line on this attack on Euro strength for next month’s policy meeting. Tonight we have inflation data due from the Euro-zone. If this figure sticks to the recent trend of sub-1% annualised inflation this could definitely hurt the Euro as traders position themselves before next month. However, perhaps a higher reading could lead to the market believing the recent price action is a bit overdone. We will find out this evening.
The Pound also weakened against the Aussie dollar over the past week. Last night saw decent employment growth for the UK with the unemployment rate falling to lowest level in 5 years. However, similar to the US income growth was not significant. The Pound actually dropped following an inflation report from the Bank of England that has squashed speculation that the BOE may raise rates soon. Similar to Europe this is because low inflation is also an issue.
The US continues to release fair data, and the Aussie continues to grind higher as data of late has been good. Tonight from the US we will also see inflation data. Similar to the EU and UK the US is already expected to keep interest rates low for extended periods.
One currency the Australian dollar hasn’t been moving higher than is the Indian Rupee. The Australian dollar has been bouncing all over the place against the Rupee as have other currencies. Results of India’s government elections will be released tomorrow. A stable government could stabilise the Rupee as inflation and currency fluctuations have been a major issue in the past. However, there is speculation that a stable government may not be on the cards.