With U.S interest rates currently sitting close to zero per-cent, any rise in these will make the Aussie Dollar seem less attractive and could see traders continue to pile into the U.S dollar. One of the other reasons is the fall in commodity prices with iron ore falling to 5 year lows last week and copper not faring much better.
In a nutshell, when Australia’s main exports and in this case hard commodities like iron ore and copper fall in price, it shows us there is less demand from countries like China and the U.S which leads to a slowdown in the Australian economy .This then leaves the Reserve Bank of Australia with little choice but to lower interest rates to try and reignite the economy which is what we have seen over the past year or so which makes the Aussie Dollar unattractive to traders leading to a depreciation in price.
We have a calender full of event risk out of the U.K this week with Inflation data set to be released on Tuesday by way of the Consumer Price Index with investors looking for a slight weakening in the headline inflation rate from 1.6 to 1.5%. Following on from this we have the Bank of England minutes for the August Rate Decision , we always look for this to provide insight into the mindset of Mark Carney the head of the BOE and his fellow governors’ as to where they stand on interest rates both now and in the future.
In 3 days we have the Scottish Referendum vote as to whether they split from the U.K and gain independence or whether they remain in the fold. Leading into this vote we should see increased volatility in the Pound as we have seen in the last week or so and could put this rally in Sterling in jeopardy.