The Australian Dollar experienced significant losses against all the majors during yesterday’s trading session after the release of Private Capital Expenditure (Capex) by the Australian Bureau of Statistics (ABS) for the first quarter of 2015. The result was a dismal result of negative 4.4%; the expectation was a result of -2.3% against a previous result of -1.7%.
The ABS release for Capex for the quarter was down to 35.9 billion, key areas for the most significant decline was building and structures which was down 6.5 per cent. Capex is considered a key factor in monetary policy decision making, indicating further concerns for the Australian economy.
UBS economists Scott Haslem and George Tharenou consider this figure to be within recession levels, and indicated that the Reserve Bank of Australia (RBA) may need to make further rate cuts on the basis of this result. ‘This data is so bad it would worry the RBA and now raises the risk they cut rates again ahead (but probably not until after second quarter CPI).’
The market reaction was instantaneous, selling off the Australian Dollar by over 1% against most of its currency partners. The Australian Dollar to Pound Sterling (AUD/GBP) Exchange Rate fell below 0.5 to a rate of 0.4995 during the local trading session then closed the Australian session barely above the 0.5 mark.
Overnight Investors turned to the UK for the release by the Office for National Statistics (ONS) release of the second estimate of Gross Domestic Product (GDP). The UK GDP is estimated to have increased by 0.3% for the first quarter of 2015. Whilst this was slightly below the forecasted expectation of a 0.4% investors took preference in the Pound Sterling and the AUD/GBP Exchange Rate continued to fall to a 6 year low of 0.4982.
The AUD/GBP Exchange Rate is currently trading at 0.4997 at 8:00 AM AEST today.
The AUD/EUR Exchange Rate falls as concerns over Greece debt default lessen
The Australian Dollar to Euro Exchange rate suffered similar losses during the local trading session after the release of the concerning Capex result dropping to the low 0.70 range.
The Euro found further strength overnight as concerns that Greece could default on their debt obligation lessened overnight. Prime Minister Alexis Psipras has announced that Greece is in the final stretch towards a positive deal to resolve the current debt concern. Prime Minister Psipras has indicated to the media that Greece is in the process of drafting an agreement between themselves and the International Monetary Fund (IMF) and the European Union.
Currently the IMF and the European Central Bank (ECB) representatives have not confirmed this agreement; however investors are reacting positively to this news as the AUD/EUR Exchange Rate lost over 1.5% to a low of 0.6974.
The Australia Dollar is unlikely to find any strength to close out the week with a lack of local data to provide any possible support leading into the June Interest Rate decision by the RBA next Tuesday the Australian Dollar is looking weak against the majors.