The Australian Dollar (AUD) had a strong local session of trading Monday, making gains against the Pound Sterling (GBP), Euro (EUR) and US Dollar (USD), however lost ground against the New Zealand Dollar (NZD). During the Offshore Session the AUD gave some of this back against the majors and lost further ground against the NZD. With no significant data out of the majors, experts are attributing this to profit taking and uncertainty around the impacts of the formalisation of the free-trade agreement with China.
The Australian Government has confirmed the formalisation of the free-trade agreement with China overnight, containing 14 commercial agreements. The key areas for interest include mining, dairy and wine, where tariffs have been removed. Whilst Tony Abbott has announced that this will be a “game changer” for the Australia that will ‘supercharge’ the Australian economy. There is concern however that this will cause greater reliance on the Chinese economy. Liberal Senator Bill Heffernan has also voiced concern in relation the potential issues attributed to China not having a floating currency. We are likely to see further fluctuations in relation to this finalisation as investors process the details of this agreement and what it can mean for our economy.
The New Zealand Dollar (NZD) has been making gains on the Australian Dollar (AUD) since late last week. The New Zealand Reserve Bank released its Financial Stability Report, where Governor Graeme Wheeler provided some positive statements concerning the state of the New Zealand banking system. Thursday New Zealand released Business Manufacturing Index Survey the figure was an improvement on the previous month and investors took positive sentiments from this causing the AUD/NZD Exchange Rate to fall below the 1.11 floor range where it had been fluctuating. The ‘Kiwi’ made further gains Monday during the local trading session with the release of positive results for their quarterly Retail Sales result which came in well above the forecast which was for 0.8% with an improvement on last quarter with a result of 1.5%. This indicating consumer spending is increasing in New Zealand as consumers appear to have a more positive outlook on the New Zealand economy and job security with New Zealand’s latest unemployment rate release at an outstanding result of 5.4%. The AUD/NZD Exchange rate is currently trading at 1.0986 at 8:30 AM AEST today.
The Reserve Bank of Australia will release their monetary policy meeting minutes for the last cash rate decision today at 10:30 AM AEST today. Interest rates have been on hold for considerable time now, and the message by Governor Glenn Stevens has been fairly consistent over recent months, generally stating that ‘Monetary policy remains accommodative’ and ‘appropriately configured to foster sustainable growth in demand and inflation outcomes consistent with the target’. Generally the release of these reports causes high levels of volatility however as the messages have been lacking any specific change to stance, if the release today includes the same position we may not see any substantial movements to the market.