The Australian Dollar had a relatively stable day of trading yesterday in comparison to the previous couple of week’s volatility where big movements have been experienced. Over the course of the day the AUD lost a small amount of ground against the majors and minors, in particular the GBP where it lost over a quarter of a percent. It wasn’t until overnight that the big movements occurred, where the AUD fell heavily against the majors, losing over a full percent against the USD, GBP and CAD. It also lost over half a percent to the Euro, it what was one of the biggest losses for the Australian Dollar this year.
There was an abundance of high-tier international economic data released overnight. The Euro-Zone commenced proceedings when the Yves Mersch, Board Member of European Central Bank made a speech discussing the ECB’s collateral and liquidity. He said that “securitisation could help collateral usage” which provided a positive outlook for the Euro-Zone and caused the Euro to strengthen against the AUD by over half of one percent.
The Bank of England Minutes were released out of the UK overnight and the result was that the 9 policy-makers again had a split vote of 7-2, with 2 of the policy makers in favour of an interest rate rise. This combined with better than expected wage growth figures and employment data caused the Pound to rally overnight, gaining close to one and a half percent. Investors and traders are now waiting in anticipation of the result of the Scottish referendum this evening. A “YES” vote in favour of Scotland’s independence from the UK is almost certain to cause detrimental damage to the value of the Pound Sterling. A “NO” vote on the other hand is likely to bring a strong degree of confidence back into the GBP’s value. Regardless of the final result, extreme volatility is expected tonight and tomorrow as the results of the referendum are tallied.
Attention was then placed upon the States when the US reported on their inflation levels. The forecast was a slight reduction from the current annualised CPI figure of 2.0% to 1.9% and the result was a miss at 1.7%. Following the inflation announcement The US Federal Reserve announced that interest rates will be kept on hold at 0.25%. Janet Yellen, Head of the US Federal Reserve made a relatively dovish statement following the announcement by the FOMC. Despite this, the Greenback gained over a full percent on the Australian Dollar.
Domestically today, only low-tier economic data will be released out Australia associated with the Reserve Bank of Australia’s Transactions. Although UK Retail Sales figures will be announced this evening, the AUD to GBP exchange rate movements is likely to move in response to the results of the Scottish referendum as economists, investors and the world await in anticipation.