Yesterday the Reserve Bank of Australia (RBA) released the minutes from its April Monetary Policy Meeting. The Australian Dollar to US Dollar (AUD/USD) exchange rate took a hit of nearly half a percent off the back of the meeting minutes being released. At 6:30 AEST on Tuesday, the local currency was trading at 0.7719 US dollars, however after the minutes were announced had dropped to 0.7679 US dollars.
At 6:30 AEST on Tuesday, the local currency was trading at 0.7719 US dollars, however after the minutes were announced had dropped to 0.7679 US dollars.
The minutes stated that the Board judged that it was appropriate to hold interest rates steady for the time being, while accepting that further easing of policy may be appropriate over the period ahead to foster sustainable growth in demand and inflation consistent with the target.
During a speech in New York on Monday Night, RBA governor Glenn Stevens went on to flag the possibility of further rate cuts by saying “the board has, moreover, clearly signaled a willingness to lower it even further, should that be helpful in securing sustainable economic growth”.
All eyes today will be firmly fixed on the release on the first quarter (Q1) year on year (YoY) Australian Consumer Price Index (CPI), which will be announced at 11:30 AEST. CPI is the headline inflation gauge for Australia and is currently forecast to decline from 1.7% to 1.3%. Given that the current forecast for CPI may see inflation dropping, this may give the RBA greater food for thought in deciding on a rate cut in May. If we do experience another cut to the official cash rate in May, we will most certainly experience further volatility for the Australian Dollar.
The New Zealand Dollar to Australian Dollar (NZD/AUD) exchange rate nears parity.
The New Zealand Dollar has traded close to parity with the Australian Dollar over the past 24 hours amid speculation that weak Australian inflation data could push it through the historic milestone. The New Zealand Dollar hit 1.0041 overnight and was trading at 1.0049 at 08:00 local time in Wellington. “A push for parity remains on the cards,” ANZ Bank said. “Weak Australia CPI figures today could see the parity corks popped.”
It’s certainly a good time to have New Zealand Dollars with the currency performing well against other majors also. Yesterday the kiwi touched a three month high of 51.79 British pence. It also touched a three month high against the Japanese Yen recording 92.10 yen and continues to perform well against a flagging Euro with ongoing concerns about whether Greece will exit the common currency.
After the results of today’s CPI data are digested by the market, all eyes will be looking forward to Friday night and the release of the USD Durable Goods Orders for March. The current forecast is to see the result increase from -1.4% to 0.6%. Durable goods are typically sensitive to economic changes and reflect optimism on the part of the buyer that their expenditure is worthwhile.
At 08:00 AEST the Australian Dollar to Euro (AUD/EUR) exchange rate is currently sitting at 0.7183, the Australian Dollar to US Dollar (AUD/USD) exchange rate is trading at 0.7714 and the Australian Dollar to Pound Sterling (AUD/GBP) exchange rate is trending in the region of 0.5166.