The AUD/USD Exchange Rate gains after US Data Disappoints
The Australian Dollar to US Dollar Exchange Rate rallied overnight with the release of weaker than expected data out of the US. The AUD/USD Exchange rate made it to a high of 78.30 US Cents after the release of Manufacturing PMI. The US Manufacturing sector expanded in January at a rate of 53.5, down from the previous result for the month of December which was 55.5. This figure disappointed the markets which were expecting a result of 54.9.
Further disappointment out of the US was the release of US Personal Spending figures. Tthe result showed that consumer spending in December actually fell by 0.3% indicating consumer sentiment in the US is not as positive for the Christmas period as the market was hoping for being significantly down from the previous result which was a growth figure of 0.5%.
These high level data releases out of the US saw the AUD/USD sell-off almost half a per cent during the offshore session overnight.
RBA Rate Decision – Rate Cut Possible
Today provides a significantly high event risk day for the Australian Dollar Exchange rate against all the Majors, with a number of significant data and economic releases.
10:30 AM AEST Australia will release Trade Balance figure and monthly Building Approvals, both of which are generally considered high data releases and important economic indicators for the health of the Australian Economy, however these may well be overshadowed as later today is the much anticipated Reserve Bank of Australia (RBA) Interest Rate decision.
The RBA have had rates on hold since August 2013 at 2.5% however at the first meeting for the year, there is speculation and a significant amount of media attention on the possibility of an Interest Rate Cut.
Economists are of mixed opinion as to whether Governor Glenn Stevens will actually cut the rates, a survey by AAP found that 15 of the 19 economists questioned believed that the rate will remain unchanged at the RBA Meeting today, however many of the major banks are calling for the necessity of an interest rate cut.
Recent decisions by the Central Banks of both Denmark and Canada have been to cut rates within their countries with inflation issues being a strong factor in the decision process.
Last week Australia released Consumer Price Index (CPI) for the final quarter of 2014 with such a poor final result bringing the annualised figure below the target range of 2% to a result of 1.7% which has provided further support for a possible rate cut.
AMP Chief Economist Shane Oliver has stated that whilst he believes the rate cut should happen today however may not be changed till March.
‘it’s a close call as to whether the Reserve will actually cut on Tuesday or wait `til March, as it may prefer to prepare the way for a cut by dropping the reference in its post meeting statement to a period of stability.’
The results are due to be released at 1:30 PM AEST Today and the AUD Exchange Rate is likely to experience a high amount of volatility surrounding this release.
A Rate cut will likely see further sell-off in the Australian Dollar against all the majors, however if RBA leave rates on hold we may well see the AUD make some gains back as the speculation of a rate cut leading into the meeting may well have seen some of this expectation built into the current Exchange Rate.