Last night saw the Aussie dollar’s heaviest selling in a number of weeks. The Aussie had started to lose some ground in the preceding night after trading in a tight range for a week or so but the real sell-off came yesterday.
Selling started to pick up pace with the release of domestic data yesterday. Australia’s Conference Board Leading Index came in slightly weaker than expected which is used to gauge short-medium term growth prospects, which then lead into Reserve Bank (RBA) Minutes for the month of May. The minutes further reiterated that the RBA will remain on hold for the foreseeable future. Similar to recent announcements that the RBA has made in terms of result, however the language in this meeting was considered more dovish than previous meetings. The rhetoric surrounding Australia’s housing market softened somewhat noting some slowing in the sector.
The market has really been focussing on the language used by Central Bankers over the past few years. As the majority of Western central banks have been locked into low interest rate policy since the GFC to support economies and very few have moved cash rates. The market has had to revert to deciphering tonality and descriptive language from Central Bankers, as it is where the only changes are being seen.
Inflation was stronger than expected from the UK last night which buoyed the Pound and made it one of the bigger gainers against the Aussie. The BOE inflation report last week resulted in a sell-off in Sterling as they noted other methods to control house prices outside of raising interest rates. Tonight will see the release of the Bank of England minutes from the last policy meeting and the market focus will once again be on tonality and language used to describe current policy and the economy.