Australian Dollar (AUD) Lifts Overnight After Weeks of Downward Movement

The Australian Dollar (AUD) has continued to be brutalised against the Pound (GBP) and US Dollar (USD) once again this week, trading at fresh 6 year lows against both currencies. The Australian Dollar (AUD) managed to gain some of the ground back overnight however, lifting between half a percent and a full percent against a basket of currencies. The ‘Aussie’ (AUD) has seen major positive movement against the ‘Kiwi’ (NZD) and the Canadian Dollar (CAD) over the past 48 hours.

Yesterday Consumer Inflation Expectation indicated that consumers expect inflation in Australia to grow, with a print figure of 3.4% from the previous 3.0%. In contrast though, the ANZ Consumer Confidence readings out of Australia indicated a fall for the current month of July.

Today the forecast of the short to mid-term growth, or perhaps contraction, of the Australian economy will be reported on in the form of the Conference Board Leading Index for May. The previous month’s reading indicated a contraction forecast to this economic indicator, coming in at -0.30%. Any improvement to this figure should give some degree of support to the AUD prior to the weekend.

Economists and investors will focus on the Reserve Bank of Australia’s (RBA) Monetary Policy Meeting Minutes on Tuesday and the CPI data scheduled for release out of Australia on Wednesday in order to determine the direction of the Australian Dollar (AUD) next week.

Australian Dollar to Canadian Dollar (AUD/CAD) Exchange Rate Extends Gains

Earlier in the week the Bank of Canada cut interest rates by a further 25 basis points, to result in a record low interest rate of 0.50%. The AUD/CAD exchange rate responded by jumping close to a full percent before settling back down slightly to trade just above the 0.95 mark. Both currencies have been struggling to find any real strength over the past few months, following on from 2 rate cuts within each respective economy this year.

The AUD/CAD exchange rate is likely to continue to remain volatile in the lead up to the weekend due to inflation data being released this evening out of Canada. Inflation in Canada is currently sitting at 0.9% which is below the bottom end of the Bank of Canada’s target inflation band of 1.0-3.0%. The forecast is that the annualised CPI figure will increase to 1.0%, with the Core CPI remaining at 2.20%. Weaker than expected inflation is likely to extend the gains in the AUD-CAD exchange rate, whilst a better than expected Canadian CPI result is likely to dissipate the gains that the ‘Aussie’ (AUD) made against the ‘Loonie’ (CAD) earlier in the week.

The AUD/CAD exchange rate is currently trading at 0.9604 at 0900 AEST.

Australian Dollar to New Zealand Dollar Surges Back Towards 21 Month High

The AUD/NZD exchange rate pushed up by close a one percent yesterday following on from lower than forecasted Consumer Price Index (CPI) data out of New Zealand. The quarterly CPI figure was expected be 0.5%, however the result disappointed at 0.4%, causing the NZD to fall immediately following the release.

Next week the Reserve Bank of New Zealand (RBNZ) will announce their interest rate decision, with the forecast at this stage being that the governing body will hold rates at 3.25% following on from their decision last month to cut by 0.25%. There are still many economists who believe that the RBNZ will proceed with a second rate cut next week, which will almost certainly see the AUD/NZD to soar towards a 2 year high, around the 1.16 mark.

Currently the AUD/NZD exchange rate is currently trading at 1.1367 at 0900 AEST.

Terry Finn