The Australian Dollar recovered all the losses seen by the currency after the Reserve Bank of Australia’s Interest Rate Decision on Tuesday over the last day.
Tuesday’s speech by Governor Glenn Stevens provided no surprises commenting that ‘monetary policy remains accommodative ‘and ‘should provide support to demand and help growth to strengthen over time’. The statements were slightly bearish and the Australian Dollar had a sell off on Tuesday afternoon however with the opening of the European session and over Tuesday night the AUD recovered some of these losses against most majors.
Interestingly, the UK Construction PMI data which was released Tuesday evening was the strongest growth figure in seven months at a figure of 64.0 however the GBP lost ground against the AUD, and with the commencement of the day on Wednesday the AUD continued to make ground against the GBP.
Yesterday we had The Gross Domestic Product (GDP) figure for Australia which came in slightly better than anticipated at 3.1%. Whilst this was a reduction from the previous result of 3.4%, indicating a slight slowdown in the economy, the result saw the AUD continue its rally, and in fact fully recover the losses experienced on Tuesday against the majors including the UK Pound.
Overnight we had another PMI index out of the UK, GBP Markit Services PMI, which again came in at a positive growth reading of 60.5, higher than both the forecast and the previous quarter’s figure. The AUD appears to be defying all economic logic this week as further ground was made against the Pound despite the economic indicators out of the UK showing growth for the Country and Australian Data indicating a slight economic slowdown. The AUD made gains against the GBP of 0.75% and is currently trading at 0.5674 at 8:00am AEST this morning.
The European session tonight will be busy with both the European Central Bank Interest Rate Decision and accompanying speech by Mario Draghi, as well as the Bank of England (BoE) Interest Rate decision.
Investors are not expecting rate movements either currency. However the accompanying statements will be of significance as we wait to hear the opinions of the policy makers on future interest rate decisions. The previous interest rate decision out of the BoE was the first in many months when the Bankers were not of the unanimous decision to keep rates on hold. If any more Monetary Policy Committee members are to cast their vote for a rate hike we may see the Pound find some strength in the face of the rally of the Australian Dollar, however any less than positive accompanying statements may see a further sell off of the Pound and allow the Australian Dollar to make even further gains.