Friday saw the US Dollar (USD) weighed down against the currency pairings of both the Australian Dollar (AUD) & Euro (EUR)
Risk sentiment improved in Europe amid fresh hope of the Greek Debt Crisis improving slightly. The European commission said that it had made $2 billion of unused funds available to Greece to help avoid a cash crunch. This announcement coupled with the continuing fragility around the USD after the Federal Reserve dropped the word “patient” on Wednesday in regards to future interest rate hikes has seen the EUR close up 3% at $1.0814 on Friday after starting the week at fresh yearly lows of $1.0458 on Monday.
The AUD/USD exchange rate also improved slightly on the back of this news, and adding to the gains for the AUD were comments from Reserve Bank of Australia (RBA) Governor Glenn Stevens, who stated that he doesn’t expect the Australian economy to fall into recession even as the mining boom fades.
Prices of both Coal and Iron ore, two of Australia’s largest exports have continued to plunge in recent months which have seen a drop in investment in the resources sector. However Glenn Stevens is confident that we will not see a repeat of the recession during the 1980s and early 1990s as a result. Mr Stevens said “If we come through this terms of trade event with neither a major outbreak of inflation in the upswing nor a major crash in the downswing, even if we have a period of sub-average growth in the process, we will have done far, far better than in any previous event of this kind, let alone one of this magnitude,” he told an American Chamber of Commerce in Australia lunch.
Mr Stevens also commented on the US interest rates, and expect the Federal Reserve will raise rates in 2015 for the time since 2006. He believes that this rate increase alongside the bond buying program by the European Central bank (ECB) will provide high levels of volatility in the Foreign Exchange markets in the coming months.
The AUD/USD exchange rate was trading between 0.7646 and 0.7803 on Friday after these announcements.
Looking forward to this week and Monday sees little in the way of domestic data, with the results of the USD existing home sales due out, and expected to increase from -4.9% to 2.4% for February.
Tuesday will provide us with some more high level economic data including the HSBC China Manufacturing PMI results, expected to drop from 50.7 to 50.3, which still leaves the result in expansion for the time being if this forecast comes in correct and the level stays above 50. This will be followed by the French and German PMI results later in the day.
Tuesday evening sees the GBP CPI index results released for February from the UK followed by the USD CPI index, excluding Food & Energy which is forecast drop from 0.2% to 0.1%.
The rest of the week is focussed on the USD, EUR & GBP in terms of important announcements with no major releases domestically.
The AUD/USD exchange rate was valued at 0.7782 on Monday at 0700 AEDT.