AUDUSD…RBA Minutes see fresh lows in the AUD
The Reserve Bank of Australia (RBA) released their minutes for their December Interest rate meeting held on Tuesday 2nd December. The minutes are a valuable tool to potentially predict future interest rate movements as they provide the collective thinking from each board member as to their vote to raise, hold, or lower the official cash rate (OCR).Glenn Stevens and co continue to think that the Australian Dollar is still too high and it needs to fall further to assist economic growth but they did back away from their recent dovish rhetoric on future Interest Rate movements.
The minutes provided clear insight that the members of the RBA want to keep the cash rate stable at 2.5% for the foreseeable future. There has been an expectation in the markets that the RBA may be looking to cut interest rates by up to 50 basis points over the next few months but this was dispelled by the RBA yesterday. What we must bear in mind it that the reason the market has been factoring in future rate cuts is as a result of the RBA members themselves. They will change their views on a dime once they start to get the result that they were initially looking for. The reaction of the Aussie Dollar was positive for a short time after but that did not last long and overnight we saw fresh lows amongst most of the majors.
GBPAUD….rallies to 12 month highs
Overnight in the UK saw inflation data released by way of Consumer Price Index (CPI) which came in lower than forecasts. A reading of 1.2% was expected by the market but lower fuel prices guided by the nearly 50% drop in crude helped to push the inflation rate down to 1% .This is a wind fall for consumers as lower prices at the pumps helps to lower the prices of goods and services as a whole. It is not all positive as lower inflation tends to indicate a slowing economy. The Pound shrugged this off though and retested the January high of 1.9180 against the Aussie, a level only seen once before in 5 years.
EURAUD… Zew survey signals brighter future for the Euro Zone?
German ZEW sentiment indicator rose 23.4 points, its highest level since may of this year, which beat analysts’ expectations of a 20 point reading .A weaker Euro and once again as with UK CPI , lower fuel costs brought about by a much lower crude price ,helped to increase optimism for both the German economy and the Euro Zone as a whole. This also helped the EURAUD exchange rate move with earshot of 1.55 level not seen since march of this year.