Australian Dollar (AUD) Remains Vulnerable to Further Declines

The Australian Dollar (AUD) remained range-bound during the Australasian trading session yesterday after falling the previous night. Overnight the ‘Aussie’ (AUD) went dangerously close to reaching a new 6 year low against the ‘Pound’ (GBP) before recovering in the early hours of this morning.

Yesterday the Australian economy reported on the Construction Work Done which indicated that the construction completed in Australia is beginning to form a declining trend, after a -2.4% reading came to fruition from the -0.6% figure previously released. Continued declines in this economic indicator usually point to a contraction in the overall economy.

Deputy Governor of the Reserve Bank of Australia (RBA), Philip Lowe, made a speech yesterday and whilst it had very little impact on the currency market, he did reiterate that “at some point, when the Fed raise interest rates the US Dollar will strengthen against the Australian Dollar, and that is something we would welcome, as we have said a number of times”. The last time Lowe spoke, his reference to the Australia Dollar was simple, ‘it is still too high’.

Today the focus locally will be on Private Capital Expenditure which is expected to decline further to -2.3% from the -2.2% previous reading. In a week that is fairly quiet in terms of domestic economic releases, the Australian Dollar (AUD) has been unable to find any support locally to lift against the majors in minors. Instead, it has moved in response to the global economic releases.

Increased volatility concerning the Australian Dollar (AUD) can be expected next week, with a number of important data releases out of Australia; including the RBA Rate Decision and Gross Domestic Product (GDP) figures.

The Australian Dollar to Pound Sterling (AUD/GBP) Exchange Rate Approaches 6 Year Low

The AUD/GBP exchange rate has been trending downward for the past few weeks, approaching a fresh 6 year low.

Tonight UK Gross Domestic Product (GDP) figures will be announced, with the expectation being a slight expansion to the annualised figure of 2.4% to 2.5%. Such a result is likely to provide continued strength for ‘Sterling’ (GBP) and push the AUD-GBP exchange rate to fresh 6 year lows.

Currently, the AUD-GBP exchange rate trading within one percent of hitting the 6 year low, sitting at 0.5035 at 0900 AEST.

The Australian Dollar to Canadian Dollar (AUD/CAD) Exchange Rate Holds Steady

Overnight, the Bank of Canada (BOC) decided to keep interest rates on hold at 0.75% as expected after cutting rates by 25 basis points earlier in the year. The AUD/CAD exchange rate has recovered from the 4 month low we saw it trading at last month in the 0.94’s to settle in the 0.96’s currently.

Tomorrow evening the Canadian Gross Domestic Product (GDP) figures will be announced. The forecast is that Canadian GDP for March will have increased from 0.0% to 0.2%, with the annualised GDP expected to remain at 2.1%.

The ‘Loonie’ (CAD) has been the stronger currency against the ‘Aussie’ (AUD) since the two battled around the parity mark in February of this year, following on from the Bank of Canada (BOC) interest rate cut. With the two recent interest rate cuts from the Reserve Bank of Australia (RBA) placing downward pressure on the Australian Dollar, it is likely that the AUD-CAD exchange rate will remain under parity in the short to mid-term.

Terry Finn