AUDNZD…Recovers lost ground after release of RBA minutes
One thing that we can take away from the minutes of the March interest rate meeting from the RBA(Reserve Bank of Australia) , is that another cut in the OCR (official cash rate) is a very real possibility over the next few months and may be as early as the April meeting. The RBA remains very open to another 25 BP rate cut, ignoring the concerns it holds for an overheated housing market in the southern states (Sydney and Melbourne).
Another concern looming large on the RBA’s radar is the commercial property sector, with rising prices being offset by slowing leasing conditions and rising vacancy rates. The RBA also acknowledged that interest rate cuts by several central banks around the world had kept the Australian Dollar at elevated levels with the quote ‘’above most estimates of its fundamental value given the significant declines in commodity prices ‘’. This gives some insight as to the RBA position on the Aussie Dollar.
The Dollar lost a tick over 0.5% against most trading partners in afternoon trade after the release of the March minutes, but recovered most of this lost ground in overnight trading. A further cut in April is not a given though, as the RBA saw ‘’benefit in allowing time for the structure of interest rates and the economy to adjust to the earlier change”, referring to the 25 BP cut in February.
EURAUD…Rally’s on upbeat German Zew
German Zew index, which measures investor confidence, continued to impress last night with a beat of the headline number 53.0, which was forecast by analysts, for the 5th month in a row. Since November of last year, Zew has increased at it’s fastest pace since 2010. Germany is the primary receiver of the ECBs QE rollout, along with lower oil prices and very structurally sound foundations, and this should hold it in good stead going forward. EUR/USD was not able to hold onto gains but EURAUD put on ¾ of 1%.
UK Unemployment and employment change may provide fuel for the Pound along with U.S. Interest rate Decision
The market will turn its attention to the UK tonight with the release of the Unemployment rate and Employment change. One of the more robust economies in the G10, the Pound could be the beneficiary of a drop in the unemployment rate which is currently sitting at 5.7%, with the market forecasting a drop to 5.6%. The Sterling has suffered along with many other currencies by the U.S. Dollar’s rapid rise to fame over the last few months, with many thinking that Janet Yellen, the head of the Federal Reserve, may be close to raising interest rates with an unemployment rate currently sitting at 5.5%. Tonight, we will all watch closely with bated breath as the FOMC (Federal Open Market Committee) meet to decide whether this rally in the US Dollar has been justified with a decision to either keep rates on hold at records lows or to raise. What should be apparent is the volatility that the currency markets will enjoy in the lead up to and then aftermath of this all important rate decision.