Australian Dollar (AUD) Experiences Mixed Movements

The Australian Dollar (AUD) is currently experiencing mixed movements against the majors and minors; with recent gains being made against the New Zealand Dollar (NZD) and US Dollar, and big losses being suffered against the Pound Sterling (GBP).

Last week the Reserve Bank of Australia (RBA) proceeded to cut interest rate by 25 basis point to a new record low Official Cash Rate (OCR) of 2.00%. There was great expectation that the RBA would actually cut interest rates last week and as such, the currency market had already factored in the devaluation impact that this move should have caused to the Australian Dollar. Just like ripping off a band-aid, the deed was done and the RBA cut rates last Tuesday and although it hurt the value of the AUD momentarily, the pain was over in a matter of seconds and the ‘Aussie’ (AUD) showed its’ resilience by actually increasing in value.

Even a rise to the Australian Unemployment Rate last Thursday from 6.1% to 6.2% did little to push down the AUD against the majors and minors, despite 2.9K jobs being erased from the Australian economy for the month of April. The ‘Aussie’ (AUD) continued to defy economic forces on Friday when the RBA released their Statement on Monetary Policy and Governor Glenn Stevens made reference that ‘further depreciation to the AUD seems likely and necessary’. Although the AUD initially declined after the statement, it proceeded to make the ground back within a few hours, with the exception being against the ‘Pound’ (GBP).

Today the focal point of domestic data releases will be on the NAB Business Confidence at 11:30 AEST.

Australian Dollar to Pound Sterling (AUD/GBP) Exchange Rate Slumps

The AUD/GBP exchange rate fell by approximately 2% late last week in response to the Conservatives appearing to have won the UK general election. Significant strength to the ‘Pound’ (GBP) occurred last Thursday night and throughout Friday as the exit polls indicated that the Conservatives looked like wrapping up the win. Despite the AUD making solid gains against the majors last week, the AUD/GBP exchange rate is one that is currently trending downward due to recent ‘Sterling’ (GBP) strength.

Tonight the Bank of England (BoE) rate decision will be announced and the governing body is expected to leave rate on hold at 0.5%. Further volatility is expected to occur in the AUD/GBP exchange rate this week with industrial and manufacturing production scheduled for release tomorrow night, followed by UK employment figures and the bank of England inflation report on Wednesday.

The AUD/GBP exchange rate is currently trading at 0.5129 at 0800 AEST.

Australian Dollar to New Zealand Dollar (AUD/NZD) Exchange Rate Recovers

The AUD/NZD exchange rate has recovered a whopping 6% in the past 2 weeks to currently trade around a 3 month high.

The ‘Aussie’ (AUD) commenced its’ rally against the ‘Kiwi’ (NZD) a couple of weeks ago when the Reserve bank of New Zealand (RBNZ) squashed the likelihood of any interest rate hikes in New Zealand this year, bringing down the value of NZD. An increase to New Zealand’s Unemployment Rate last week and the resilience of the AUD last week saw the AUD/NZD exchange rate recover dramatically.

With further interest rate cuts appearing unlikely in Australia this year, the recent trend of a strengthening AUD/NZD exchange may very well continue throughout May. The AUD/NZD exchange rate is currently trading at 1.0656 at 0800 AEST.

Terry Finn


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